top of page

Private Limited Company

What is Private Limited company ?

A Private Limited Company (Pvt Ltd) in India is a privately held business entity defined under Section 2(68) of the Companies Act, 2013. It is one of the most popular business structures for startups and small to medium-sized enterprises due to its limited liability, separate legal identity, and ease of raising capital. 

A Private Limited Company is a company that:

  • Restricts the transferability of its shares.

  • Limits the number of shareholders to a maximum of 200 (excluding employees and former employees who continue to hold shares).

  • Prohibits inviting the public to subscribe to its shares or debentures.

  • Has a minimum of 2 shareholders and 2 directors, with at least one director being an Indian resident (stayed in India for at least 182 days in the previous calendar year).

Why Choose a Pvt Ltd Company?

  • Investor-Friendly: Preferred by venture capitalists and foreign investors due to limited liability and transparency.

  • Startup India Benefits: Eligible for government schemes like Startup India, offering tax exemptions and funding support.

  • Scalability: Allows growth through equity funding without public listing.

Key Features of a Private Limited Company

  • Limited Liability: Shareholders are liable only to the extent of their shareholding, protecting personal assets from business liabilities.

  • Separate Legal Entity: The company is independent of its shareholders and directors, capable of owning property, entering contracts, and suing or being sued in its own name.

  • Perpetual Succession: The company continues to exist regardless of changes in membership, death, or insolvency of shareholders or directors.

  • Name Requirement: The company name must end with “Private Limited” or “Pvt Ltd” (e.g., ABC Pvt Ltd).

  • Share Transfer Restrictions: Shares cannot be freely traded and require approval from the Board of Directors or as per the Articles of Association.

Steps to Start a Private Limited company in India

The registration of a Pvt Ltd company in India is done online through the MCA portal using the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form. The process typically takes 12-18 days, depending on approvals and document submission. Key steps include:

 

  1. Obtain Digital Signature Certificates (DSC): Required for directors to sign electronic documents.

  2. Apply for Director Identification Number (DIN): Up to three directors can apply for DIN via SPICe+.

  3. Name Approval: Submit a unique name (not resembling existing companies or trademarks) for ROC approval via SPICe+.

  4. File Incorporation Documents:

    • Memorandum of Association (MOA): Defines the company’s objectives and scope.

    • Articles of Association (AOA): Outlines internal rules and management.

    • Proof of Registered Office: Rental agreement, ownership deed, or utility bills (not older than 2 months).

    • Affidavit from Subscribers: Confirming willingness to become shareholders.

    • Identity and Address Proof: PAN card, Aadhaar, passport, or utility bills for directors and shareholders.

      ​

  5. Pay Fees and Submit SPICe+ Form: Includes application for PAN, TAN, GST, EPFO, ESIC, and professional tax registration.

  6. Certificate of Incorporation: Issued by ROC upon approval, along with PAN and TAN.

  7. Open Bank Account: Deposit the minimum capital (no minimum capital requirement as of 2015).

  8. Obtain Licenses/Permits: Depending on the business, such as GST registration (mandatory if turnover exceeds ₹40 lakh), trade license, or environmental clearance.

​

Compliance Requirements

  • Annual General Meetings (AGMs): Must be held annually to approve financial statements.

  • ROC Filings: File audited financial statements (under Sections 129 and 137) and annual returns (under Section 92) within 30-60 days of AGM.

  • Books of Accounts: Maintain proper financial records.

  • Tax Filings: File income tax returns annually, requiring a digital signature.

  • GST Compliance: If registered, file regular GST returns.

​

Advantages​

  • Limited Liability Protection: Shareholders’ personal assets are safeguarded from business debts or losses.

  • Ease of Raising Capital: Can issue shares or secure funding through private placements, attracting investors.

  • Credibility and Trust: Registration with the Registrar of Companies (ROC) and public disclosure of details on the Ministry of Corporate Affairs (MCA) portal enhance credibility.

  • Perpetual Existence: Unaffected by changes in ownership or management.

  • Tax Benefits: Eligible for deductions on business expenses and benefits under schemes like Startup India.

  • Attracts Talent: Can offer Employee Stock Ownership Plans (ESOPs) to retain skilled employees.

bottom of page