There is an explosion of startups in India and people are looking for ways to make their own business. This means that you need to be familiar with the different types of business registrations, such as sole proprietorship, limited liability and private limited companies. We will be discussing the different aspects of a private limited business in this article.
What is a private limited business?
Private limited companies are privately-held businesses, as the name implies. Private stakeholders hold it. Private limited companies have a liability arrangement similar to a limited partnership. A shareholder’s liability is limited to the number of shares they own. The shareholders are not liable for any other than the share value. The Ministry of Corporate Affairs (MCA) is the governing body of such a company.
Section 2 (68) of the Companies Act, 2013 defines a private company as:
“A Company having a minimum paid-up share capital as may be prescribed, and which by its articles,— (i) restricts the right to transfer its shares; (ii) except in case of One Person Company, limits the number of its members to two hundred; (iii) prohibits any invitation to the public to subscribe for any securities of the company.”
Characteristics of a Pvt Ltd Company
Once you have a basic understanding of what a private limited business is, it is time to learn about the characteristics of one.
- Membership: To start a company like any other, you must have at least two shareholders. It is a small company so there is a limit of 200 members. To run the company, there is a requirement for two directors.
- Limited liability structure: In a private limited company, each shareholder or member is only liable for their actions. The shareholders can sell their assets to repay any loss, regardless of circumstances. The personal and individual assets of shareholders are not at danger
- A separate legal entity: This legal entity is distinct and continues in perpetual succession. This means that the company will still exist in law even if its members die or it becomes insolvent. The company’s life will never be affected by the lives or deaths of its shareholders and members, unless it is dissolved through resolution.
- Minimum capital required to be paid up: Private limited companies must have a minimum capital of Rs. 1 lakh. It could be higher, as MCA may from time to time prescribe
How to Register a Private Limited Company
Once you have chosen a company name, follow these steps:
#1: Register for DSC (Digital Signature Certificate).
#2: Request the DIN (Director Identification number)
#3: Request a name availability
#4: To register a private limited company, file the EMoa or EAOA
#5: For the PAN or TAN of your company, apply
#6: RoC will issue a certificate of incorporation with PAN or TAN
#7: Register for a bank account in the name of your company.
This will allow you to set up your private limited company. It is a good idea to speak with the right people in order to make the right decision for smooth growth.
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