Do you want to know how to register a private limited company in India? The process of company registration is a lot simpler in India at present. In this article, we will walk you through the process of private limited company registration in India step by step.
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. As a result, more and more startups are opting for this type of company structure.
Here are the 6 Steps to Register a Private Limited Company in India
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.
There are mainly 6 steps you need to follow while registering a Pvt. Ltd. company in India. They are the following:
1. Obtain Digital Signature Certificate from an MCA-authorised agency
The first step for a person to register a company in India is to apply for a Digital Signature Certificate, commonly named DSC. This is simply an e-signature that will be needed in every step of the company registration process online. You need to apply for the class 3 DSC with USB tokens.
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 the 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. It 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.
Suggested Read: How to Register a Small Business in India
3. Name Approval for Your Private Limited Company
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 so 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. Prepare Memorandum and Articles of Association
Prepare the Memorandum of Association (MoA) and Articles of Association (AoA) for your Private limited company. 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
5. Application for PAN & TAN
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 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.
6. Pay the Required Government Fees & Get Incorporation Certificate
Finally, you will be directed to pay the fees and stamp duty to a payment gateway. The fees will change according to the authorized capital fee and the stamp duty will vary according to your location. As mentioned earlier, you will receive the incorporation certificate along with PAN & TAN number after all due diligence is done.
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.
Frequently Asked Questions on Registering a Private Limited Company in India
What is the Cost to Forma 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. 10,000 to Rs, 15,000 to form a Private Limited Company in India. However, in states like Madhya Pradesh, and Punjab the costs might increase due to higher stamp duty expenses.
What are the requirements to start a Private Limited Company in India?
As mandated by the companies act 2013, a private limited company formation must have a minimum of two directors registered. The maximum number can be 200.
In addition, director members must have a Director Identification Number (DIN) and one of them must be a resident of India. Furthermore, the authorized capital required to form a private limited company is a minimum of Rs 1 Lac.
What are the Advantages and Benefits of Forming a Private Limited Company?
There are multiple benefits of setting up a private limited company in India. Some of them are listed below:
- Company Name is secured. No one can duplicate the name of the company.
- Creates a unique legal entity. Your personal assets get protected.
- Financial risk is limited. If the company fails, the loss is distributed to all the shareholders.
- Make it easy to raise funds from banks, and other financial investors.
- Easy transferability of ownership. The owners can easily transfer their shares to others.
- Creates confidence in the business ecosystem. The trustworthiness of the company increases substantially.
- You can buy properties in the name of the company.
- Uninterrupted existence.
What are the Documents Required to Form a Private Limited Company?
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 – Can be PAN card or Passport
- Address Proof – Can be 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.
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 of compliances.
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 among themselves.
One-person company formation is the new entrant in the company registration process in India. This 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.
A Private Limited company is generally formed two or more individuals 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.
Editorial Staff at NextWhatBusiness is a team of Business Consultants having years of experience in small and medium scale businesses.