How to Register a Private Limited Company in India

Starting a private limited company in India is a popular choice among entrepreneurs due to its benefits such as limited liability, separate legal entity, and access to funding options. If you are planning to register a private limited company in India, this article can be a great help for you. as we have covered all the details here. It includes the application process, documents required, costs, and more.

The Companies Act, 2013 allows an entrepreneur to choose a business structure from a wide range of options. A private limited company is the most popular among them. It is observed, more and more startups are opting for this type of company structure presently.

A private limited company is essentially a company formation structure held by two or more (less than 200) private members. The biggest advantage of forming a private limited company is that the liabilities of directors get minimized a lot as the liability is distributed to all the shareholders.

Once you have come up with a business idea and decided to form a private limited company, you will need to follow some procedures to register it.

8 Steps to Register a Private Limited Company in India

1. Obtain Digital Signature Certificate (DSC)

The first step for a person to register a private limited company in India is to apply for a Digital Signature Certificate, commonly named DSC. A DSC is an electronic form of a signature. It ensures the authenticity of documents filed online. It can be obtained from government-approved agencies.

The time to receive DSC is normally around 2 to 5 days. In the case of a foreign national, a copy of the Passport is required to apply.

2. Apply for a Director Identification Number (DIN)

The next step is to apply for a Director Identification Number or popularly called DIN. Having a DIN Number is mandatory to become a director of a private limited company at present. You can apply for DIN online through the Ministry of Corporate Affairs (MCA) website by submitting the required documents and fees.

DIN was introduced for the first time with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006. It is a 20-digit unique number created digitally in an alphanumeric code provided by the Ministry of corporate affairs.

3. Name Approval

Once you’ve decided on a name for your business, also describe the significance of the name in one or two sentences. It would need to be entered into the form.

While applying, ensure the following:

• The company’s proposed name has not already been taken on mca.gov.in. Furthermore, check that there is no registered trademark in the same name by checking at ipindia.nic.com.
• The first half of the name is unique. Avoid geographical references, adjectives, abbreviations, and generic terms. The second half amply clears the sector you’re in.

Suggested Read: Trademark Registration in India

4. Drafting & Filing Incorporation Documents

Next, prepare the MOA and AOA. These are the constitutional documents of the company. These documents define the objectives, rules, and regulations of the company. They should be drafted in accordance with the Companies Act, 2013. Generally, a Company Secretary drafts it and it should contain the signature of one. The MoA will also contain the main objects of your business activities.

Once you have obtained the DSC, DIN, and name approval, you can proceed to file the incorporation documents with the Registrar of Companies (ROC). The documents include Form SPICe (Simplified Proforma for Incorporating Company Electronically), MOA, AOA, and other required declarations and affidavits.

5. Payment of Registration Fees

You will need to pay the registration fees online based on the authorized capital of the company. The fees are determined by the MCA and vary depending on the company’s capital structure.

Finally, you will be directed to pay the fees and stamp duty to a payment gateway. The fees are determined by the MCA and vary depending on the company’s capital structure. Also, the fees will change according to the authorized capital fee and the stamp duty will vary according to your location.

Please remember that these are standard procedures and are applicable in most of the cities in India. however, in some cities, there are some additional (or lack of) processes that you will have to find out.

6. Certificate of Incorporation

The ROC will issue a Certificate of Incorporation (COI), after successful verification and approval of the documents. This document works as proof of the company’s existence.

7. Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN)

After obtaining the COI, apply for PAN and TAN from the Income Tax Department. These are essential for tax compliance and business operations.

Permanent Account Number or PAN is a must-have document for taxpayers of the country. It is a unique 10-digit alpha-numeric number provided to any taxpayer.

Tax Deduction and Collection Account Number or TAN on the other hand is a 10-digit alphanumeric number provided by the Income Tax department. TAN is an essential number required by all persons who will be deducting tax at source (TDS) as well as for collecting tax at source (TCS).

The introduction of filing registration through SPICe+ will allow getting PAN and TAN numbers automatically after successful company incorporation. At present, it is a must to apply for PAN and TAN in the SPICe Plus form.

8. Open a Bank Account & Start Business Activity

Once you have the COI, PAN, and TAN, you can open a bank account in the name of the company. This account will be used for business transactions and financial operations. Your company is now legally-compliant and free to run business activities.

Frequently Asked Questions

What is a Private Limited Company?

A private limited company is a type of business entity that is privately held and has limited liability. It is one of the most popular forms of business structure in India. A private limited company is registered under the Companies Act, 2013 and is regulated by the Ministry of Corporate Affairs (MCA).

Furthermore, Private limited companies are further classified into different types. It can be limited by shares, limited by guarantee, or unlimited companies. One can start a private limited company with a minimum of two directors and can have 200 members at most.

>What are the Main Advantages of a Private Limited Company?

Some of the major advantages of a Private limited company in India  are as follows:

• A minimum of two directors is needed.
• The liability of each shareholder or member is limited. Personal assets are not at risk.
• It is a separate legal entity.
• Continues to exist in the eyes of the law in perpetual succession.
• The minimum paid-up capital required is only Rs. 1 Lac.

What is the Cost to Form a Private Limited Company in India?

The cost to set up a private limited company in India includes government fees and professional fees by CA/CS/ or a lawyer. Though the government fees are fixed, the professional charges vary.

On average the cost will be in the range of Rs. 15,000 to Rs, 20,000 to form a Private Limited Company in India.

What are the Documents Required?

One does not need many documents to form a private limited company in India. You need some basic KYC documents and address proof of office. The list of documents are listed below:

• Identification Proof – This can be a PAN card or Passport
• Address Proof – This can be an Aadhar card, ration card, voter card, or driver’s license.
• Residence Proof: Rental agreement, bank statement, or electricity bill.

What are the Ways to Register a Company in India?

There are broadly 5 Popular ways to register a company in India.

• Sole Proprietorship: If you are just starting a business as an individual with a very small investment of your own, you can go for a sole proprietorship firm. It is easy to form without thinking much about compliance.
• Partnership: If two or more individuals want to start a business with an investment of their own, they can opt for a partnership firm. However, in this formation, partners are personally liable for any loss incurred in the business. This formation works only when the partners have complete faith in themselves.
• One-person Company:  This formation is the new entrant in the company registration process in India. One Person Company is a separate legal entity that continues to exist in the eyes of the law in perpetual succession. the concept was introduced by the Companies  Act of 2013. As the name suggests a single individual can form a company with several benefits while enjoying the freedom of a sole proprietorship.
• Limited Liability Partnership or popularly called LLP is another relatively new way of registering your company. Since its launch in the year, LLP has become the most popular company incorporation route for new startups. This company formation provides freedom of partnership with limited liability benefits to business owners.
• Private Limited Company: A Private Limited company is generally formed by two or more individuals who agree to associate together for a common business interest This kind of formation is useful for raising capital from financial institutions, angel investors, venture funds, etc.

Depending on the nature and resources of your business, you need to decide on what kind of business formation to incorporate.

What is the minimum capital requirement for registering a Private limited company?

You need to maintain a minimum paid-up capital of Rs. 1 lac to start a private limited company in India.

Can a foreign national be a director in an Indian Private limited company?

Yes, a foreign national can be a director in an Indian private limited company, subject to certain conditions.

How long does it take to register a Private limited company in India?

The registration process typically takes around 10-15 days. However, it depends on the time taken for document verification and approval by the ROC.

Are there any post-registration compliances for a Private limited company?

Yes, after registration, a private limited company needs to comply with various legal and regulatory requirements, such as filing annual financial statements, conducting regular board meetings, and complying with tax obligations.

Can a Private limited company be converted into another type of company later?

Yes, a private limited company can be converted into a public limited company or any other type of company, subject to certain conditions and compliance with the Companies Act,