Setting up a Private Limited Company
A Private Limited Company is one of the most popular and flexible business structures in India. Governed by the Companies Act, 2013, it offers a robust framework for businesses to operate with limited liability and higher credibility.
Whether you are an entrepreneur, a startup, or an established business, registering as a Private Limited Company provides numerous advantages, including access to funding, legal protection for shareholders, and enhanced business credibility.
Private Limited Company is a type of business entity in India governed by the Companies Act, 2013. It limits the liability of its shareholders to their shareholding, provides a separate legal identity, and restricts the transfer of shares.
Any individual or group of individuals can register a Private Limited Company, provided there are at least two directors and two shareholders. Both individuals and entities can act as shareholders.
• Minimum Number of Directors: At least two directors are required and maximum 15 Directors • Minimum Number of Shareholders: At least two shareholders are required and Maximum 200 hundred • Minimum Capital: There is no mandatory minimum capital requirement, but authorized and paid-up capital details must be provided. • Registered Office: A registered office address is mandatory and must be supported by proof, such as a rental agreement or utility bill.
The following documents are required: • PAN card of the directors and shareholders • Aadhaar card or other identity proof • Address proof (e.g., utility bills or bank statements) • Passport-size photographs • Proof of registered office address (e.g., rental agreement or sale deed) • Email, mobile numbers
The registration process typically takes 10-15 working days, depending on the submission of complete documents and approvals from the Government.
• Director: A director is responsible for managing the day-to-day operations and making decisions for the company. They are appointed by the shareholders. • Shareholder: A shareholder is an owner of the company, holding shares that represent their stake. They may or may not be involved in the management of the company.
No, a Private Limited Company requires at least two directors and two shareholders. However, you can consider registering a One Person Company (OPC) if you are the sole proprietor.
Post-registration, a Private Limited Company must comply with: • Auditor Appointment • Commencement of Business • Issuance of Share Certificates to shareholders • Annual filing of financial statements and returns • Regular board meetings • Maintenance of statutory registers • GST, TDS, and income tax filings, as applicable
Yes, foreign nationals and entities can register a Private Limited Company in India, subject to compliance with Foreign Direct Investment (FDI) guidelines and RBI approvals
After incorporation, you receive the Certificate of Incorporation, PAN, and TAN. You can then open a corporate bank account, apply for GST registration, and start business operations.
The cost varies based on factors like authorized capital, Digital Signature Certificate (DSC) and professional fees. Contact us for a detailed quote tailored to your needs For more queries or assistance, feel free to contact our team!
Do's
For Shareholders:
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Understand Shareholding Rights:
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Familiarize yourself with rights like voting, receiving dividends, and inspecting company records.
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Participate in Meetings:
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Attend Annual General Meetings (AGMs) or Extraordinary General Meetings (EGMs) to stay informed about the company's progress.
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Stay Updated on Resolutions:
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Be aware of decisions requiring shareholder approval, such as issuing new shares or amending the Articles of Association (AoA).
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Transfer of Shares:
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Comply with the transfer process outlined in the company’s AoA.
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For Directors:
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Obtain a Director Identification Number (DIN):
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Ensure your DIN is active and updated in the Ministry of Corporate Affairs (MCA) database.
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Board Meetings:
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Conduct the first board meeting within 30 days of incorporation and hold at least 4 board meetings annually (1 every quarter).
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Maintain Statutory Records:
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Ensure registers like the register of members, directors, and share transfers are updated.
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Compliance Filings:
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File annual returns, financial statements, and other periodic filings (like DIR-3 KYC, MGT-7, and AOC-4) with the Registrar of Companies (RoC).
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Ensure Tax Compliance:
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Deduct and deposit TDS, file GST returns, and adhere to other tax obligations.
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Ensure Proper Governance:
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Implement internal controls, ensure transparency, and prevent conflicts of interest.
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For CEO & CFO:
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Strategic Planning:
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Develop and execute business strategies to achieve the company's goals.
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Financial Oversight:
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Ensure proper maintenance of financial records, budget adherence, and timely audits.
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Regulatory Compliance:
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Stay informed about legal and financial regulations affecting the company.
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Stakeholder Communication:
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Regularly update directors and shareholders on financial performance and other critical matters.
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Performance Monitoring:
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Monitor the company’s operations and take corrective measures when necessary.
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Don'ts
For Shareholders:
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Interfere in Management:
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Avoid micromanaging the day-to-day operations; this is the directors’ responsibility.
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Ignore Company Notices:
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Failing to respond to company resolutions or voting can affect your interests.
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Transfer Shares Arbitrarily:
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Follow the AoA’s stipulated procedure for transferring shares to avoid legal disputes.
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For Directors:
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Non-Compliance with Legal Duties:
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Failing to maintain records or submit returns can lead to penalties.
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Conflict of Interest:
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Avoid engaging in transactions where personal interests conflict with the company’s interests.
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Neglect Corporate Social Responsibility (CSR):
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If applicable, ensure CSR obligations are met (required for companies exceeding thresholds in turnover, net worth, or profit).
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Default on Statutory Payments:
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Ensure timely payment of taxes, PF, ESI, and other dues.
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For CEO & CFO:
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Mismanagement of Funds:
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Avoid misuse or misallocation of company resources.
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Delay in Financial Reporting:
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Ensure timely preparation and submission of financial reports to prevent non-compliance.
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Ignore Risk Management:
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Overlooking risks like market competition, cybersecurity, or compliance issues can be detrimental.
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Underestimate Stakeholder Expectations:
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Ignoring feedback from stakeholders, including employees and customers, can harm the company’s reputation.
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Limited Liability
Protection
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The financial liability of shareholders is restricted to the amount they have invested in the company’s shares.
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In the event of business losses or legal liabilities, the personal assets of shareholders remain protected, ensuring financial security.
Enhanced Credibility and Professional Image
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A registered Private Limited Company is perceived as more credible and reliable by customers, suppliers, and investors.
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The structure ensures greater transparency in financial dealings, helping to build a strong brand reputation.
Distinct Legal
Identity
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A Private Limited Company is recognized as a separate legal entity from its owners, meaning it can own property, sign contracts, and enter into legal proceedings in its own name.
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This distinction helps in limiting the risk exposure of individual shareholders and adds to business credibility.
Tax Efficiency and Government Incentives
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Private Limited Companies are eligible for various tax exemptions, deductions, and lower corporate tax rates under government schemes.
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Unlike sole proprietorships or partnerships, companies can opt for tax-saving strategies, ensuring better financial efficiency.
Easier Fundraising and Investment Opportunities
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Private Limited Companies are more investor-friendly, making it easier to attract venture capitalists, angel investors, and institutional funding through equity financing.
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Banks and financial institutions prefer lending to companies over unregistered businesses, making it simpler to secure business loans and credit facilities.
Flexible Ownership Structure
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Shareholders can transfer or sell their shares without disrupting the company’s day-to-day operations.
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This makes it easier to introduce new investors or exit the business when required, without affecting continuity.
Perpetual Succession & Business Continuity
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The company’s existence remains unaffected by changes in ownership, retirement, or even the death of shareholders.
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This ensures long-term stability and uninterrupted business operations, making it a sustainable entity.
Regulatory Compliance and Better Corporate Governance
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A Private Limited Company operates under a structured governance framework, ensuring compliance with statutory laws.
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The requirement of audits, board meetings, and record-keeping promotes professional management and operational discipline.
Ability to Attract and Retain Talent
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Unlike other business structures, a Private Limited Company can offer Employee Stock Ownership Plans (ESOPs), allowing employees to become stakeholders.
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This helps attract top-tier talent and boosts employee motivation, leading to improved business growth.
Global Expansion and International Recognition
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Private Limited Companies enjoy better market credibility and can easily enter into international contracts, partnerships, and collaborations.
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Many foreign investors and multinational companies prefer dealing with registered entities, facilitating expansion into global markets.
Access to Government Benefits and Schemes
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Private Limited Companies can avail themselves of various government incentives, startup benefits, and subsidies designed to support business growth.
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Programs such as Startup India, MSME benefits, and financial grants are available exclusively to registered companies.
