What is a Private Limited Company?
A private limited company is registered under the companies act 2013, helped privately by individuals or groups. The members of a private limited company have limited liability; their liability is limited to the range of shares they hold. The shares of a company cannot be traded publically. We will talk about everything you need to know about a private limited company, including its characteristics, features, and private limited company registration.
In India, start-ups need help registering their businesses. The process is complex and requires extensive documentation and time in the case of a public company. Hence, most entrepreneurs register their companies as private limited companies. It is because of the ease and various advantages of a Pvt ltd company registration, which is discussed below in comparison with the public company.
Various Advantages of Private Limited Company Registration
Ownership
Since shares of a private limited company are not publicly traded and exclusively held by the founders, management, or private investors, there are fewer chances of confusion and complexity in the company’s direction as there are fewer shareholders. Whereas for a public company, the shares can be marketed to the public in the open market.
Number of shareholders
For a private company, a minimum of 2 shareholders are required, whereas for a public company, a minimum of 7 shareholders are required.
Legality
The legal formalities involved in the registration of a company can be costly. The legal formalities and the whole process are lengthy and time-consuming for a public company. It is also costly compared to a private company.
Information disclosure
A public company has to release its financial reports publically, while a private company can keep its financial reports confidential.
Decision-making and management
The management and decision-making become very complex in a public company because of the huge number of shareholders. However, in a private limited company, the management and decision making easy and less complex because of the limited number of shareholders.
Stock market pressure
Stock market pressure refers to the pressure shareholders exert on the company to increase its earnings. But as in a private company, there is no stock market pressure, and you don't have to worry about shareholders' interference and expectations as long as they work within the law.
Long-term planning and growth
Managers of public companies are forced to increase the value of their stocks in the short run, whereas a private company can focus on long-term goals as such pressure is eliminated.
Share Capital
Capital is the most concerning part while opening a private or public company. In India, a minimum of 5 lakh share capital is required to start a public company, which makes it very expensive. However, there is no limit on capital for starting a private company. Previously, the private limited company should at least have a minimum capital of 1 lakh, but now there is no such restriction.
Company registration in India involves a lot of documentation and complex procedures. However, it’s easier now to get Pvt ltd company registration in India with the help of consultancies whose main business activity is to provide such services. Nevertheless, a particular procedure should be followed for private limited company registration in India, as explained below.
Steps involved in Pvt ltd company registration in India
Step 1: Obtaining DSC (digital signature certificate) and DIN (director identification number)
Step 2: Decide a name for the company and apply for it to check whether some other company already exists with that name or not.
Step 3: Draft and file the Memorandum of Association and the associated article for the further company registration process.
Step 4: Apply for the PAN and TAN of the company to support the banking procedures.
Step 5: Obtain the COI (certificate of incorporation), which would be issued by the Registrar of the company along with PAN and TAN.
Step 6: The last step after obtaining COI is to open a current account with any bank to carry out all the business transactions.
Some steps should be followed for private company registration in India. In the matter of a public company, the number of steps is more, and it’s comparatively costlier than a private company. The procedure of registering a public company is more complex than that of a private company. So, a private company is easier to start in India than a public company.
Apart from registration, certain important things must be done after your company is incorporated. These things are very important to do and mandatory for all the private companies registered in India. These are as follows-
Mandatory steps for all Private Limited Company Registration
GST Registration
When the company's annual turnover is more than 40 lakhs, it needs to get its GST registration done.
GST Return
Once the registration is done, the company must file GST returns annually.
Accounting
Companies must carry their books of accounts for various purposes.
Statutory Audit
Within 30 days of incorporation, the company is supposed to appoint an auditor to audit the financial statements every year.
MAT Audit
Minimum alternate tax is the minimum tax that should be paid by every company every year. Pvt Ltd companies must get their accounts audited under Minimum Alternate Tax.
Trademark Registration
Trademark registration should be done for full protection against copying and imitating your brand name, logo, business name, etc., by any other company.
Company registration in India can be daunting, as it involves complex procedures and documentation. However, companies like lawgical India provide company registration services in India for easy and hassle-free registration. Lawgical India, with its team of experts, can assist you with your private limited company registration and get everything done within a few days at a very reasonable rate.
