What is a private company?
Companies which are held privately for carrying small businesses are referred to as Private Limited Company and their shares are not free to be traded or subscribed by the public. Members of private Companies have liability limited to the number of shares held by them.
As per the provisions of Companies Act 2013, the minimum and maximum limit of the member in a private company is 2 and 200 respectively. A private ltd. The company carries perpetual succession and limited liability. The minimum paid-up capital is required to be Rs. 1 lakh or higher and the minimum number of directors is 2.The name of a private company uses “private Limited” at the end.
Now there are various steps involves in the process of formation and incorporation of a Private company according to the Companies Act 2013.
Steps involved in the formation of a Private company:
- Obtaining the Digital Signature Certificate:
As the registration process is online and it requires the creation of a digital signature to file all the required forms. For the same, you need to obtain a DSC (mandatory for all the subscriber and witnesses of MOA and AOA). You could easily issue your Digital Signature Certificate from the certified agency in a short period of time.
Application for a Director Identification Number:
This is an identification number for the director of the company. The Directors’ PIN number is issued by Ministry of Corporate Affairs (MCA).
In case, the proposed directors already have a DIN, they could avoid this step.
Approval of company’s name:
The proposed name of the company needs to obtain approval from the Ministry of Current Affairs (MCA). The name must be acceptable as per the provisions of Companies Act 2013 which state:
- The name should be unique
- Should have a suffix “private Ltd”
- The name should not be offensive or illegal
- The name should be meaningful and not copied.
This name approval could be obtained within a period of 2-3 days.
- Submission of incorporation application:
The incorporation application could be submitted in SPICe form with the MCA. This incorporation application could be submitted in 1-2 business days.
- Submission of MOA and AOA:
Afterwards, the submission of Memorandum of Article and Association of Article is to be made with MCA with subscription statement.
- The issue of the incorporation certificate:
Generally, it takes almost 15- 25 days in the formation of a private limited company. Once the company has been incorporated, you will receive a certificate of incorporation which will serve as a proof of the creation of your company. It includes your CIN number as well.
- Applying for PAN, TAN and Bank account of the company:
Now, you have to apply for the PAN and TAN which will be received in a period of 7 days (working).
By submitting the certificate of incorporation, MOA, AOA and Pan with your bank, you could open a bank account for the company.
Documents required for registration of a private limited company:
- PAN card copies of all the directors/ passports for foreign nationals.
- Passport size photographs of directors
- Aadhar card/ voter ID card copies of the directors
- Address proof of directors such as driver’s license/ passport/ ration card/ Aadhar card and so on.
- (In case of a rented property) <>copy of rent agreement
- Water/ electricity bill/ bank statement of the business place
- (In case of owned property) copy of property papers
- Landlord NOC
All these documents are required for the legal identification of the members/ directors and the company as per the provisions of Companies Act 2013.
Other minimum requirements:
- A minimum number of shareholders must be 2.
- A minimum number of directors must be 2.
- Minimum paid up share capital must be 1 Lakh
- All the directors must have a DPIN/ DIN
- At least one of the designated partners must be an Indian resident.
Another relevant consideration involved in the procedure of formation of a private company would be the cost involved.
The cost is affected by a number of different factors such as the number of directors and so on.
- The cost of DSC is around Rs.1500- 2000 (valid for 2 years)
- The cost of DIN is Rs. 500 per DIN.
- Name approval requires almost Rs.1000 by the MCA.
- Other petty expenses would include notary charges and stamp duty.
- Expenses in the registration of the company would be around 3000- 4000.
Apart from these major expenses incurred in this process, there might be some other petty expenses or professional fees (in case).
The formation of a private Ltd company in India typically takes 10-20 working days. This is not a much tough task and the above procedure will make it much simpler for you.