Incorporation of a Private Limited Company – Types and Process

When you launch a business, you should also choose the right company structure for your business that will enable business-related activity. This right structure will enable business growth and therefore bring in more revenue. While we will talk about setting up a private limited company in this blog, it’s vital that we first understand the different types of businesses in the country.

One person company or sole proprietorship: This is the best way to register a company if you are the sole owner and member

Limited Liability Partnership (LLP): Liabilities are limited only to the agreed contribution in LLPs

Private company: Private Ltd Companies are those that have shareholders, directors, and founders. Each individual is a company employee

Public limited company: Public limited companies are voluntary associations of members. They are incorporated under company law.

How to Register a Private Limited Company

If you’re setting up a private limited company, you need to follow the following steps

  1. Obtain a unique digital signature certificate
  2. Procure the director identification number
  3. Reserve a company name
  4. Obtain the company formation certificate

Obtain a Digital Signature Certificate

To set up a private limited company, you first need to obtain a unique digital signature certificate for yourself. The company board or the managing director is required to have this certificate. The DSC is required while filing e-forms and while submitting I-T returns.

The DSC is renewed every 1-2 years. People who serve as shareholders, as well as company directors must obtain the digital signature certificate.

The following things need to be submitted for a DSC

  • Applicants passport-sized photo
  • Self-attested copies of the applicants address proof
  • Self-attested PAN card

Procure the Director Identification Number

The Ministry of Corporate Affairs assigns a Director Identification Number (DIN) to Directors of companies. The number is valid for life, unless withdrawn, surrendered, or removed by the MCA.

Registration of PVT LTD company cannot be done without a DIN. DINs are also used when a director is appointed to another company or takes charge as the Designated Partner of an LLP.

Documents Required for DIN:

  • Applicant’s passport size photo
  • Self-attested copies of the applicant’s Address proof
  • Applicant’s self-attested PAN card

Reserve a Name for the Company

Before incorporating a company, it requires a unique name. To do so, the Directors must submit an application asking to reserve a particular name for the Private Limited Company via e-Form INC – 1. Fill the forms and pay the processing fees. Do note that an application contains six names ranked in order of preference. There is an explainer on why they are a good fit for the company. Government officials will then check the availability of each name and then approve or reject the application accordingly. Furthermore, most Directors hire professionals to check the availability beforehand, to avoid any confusion later on. It is up to the Registrar of Companies to decide whether to approve or reject the application.

General Guidelines for Choosing a Name for the Private Limited Company:

  • The name must be easy to remember, as well as spell.
  • It should provide the company with a unique identity.
  • The name must be short, simple, and creative.
  • Name must not contain within it any words which are derogatory or deemed unparliamentary.
  • It must not contain words which are offensive and prohibited.
  • It must not infringe any legal Trademarks registered earlier.
  • The name cannot be similar or identical to any other company’s names.

If approved, the RoC reserves the name for 60 days, within which the company must apply for incorporation, failing which the name shall lapse and the process repeated.

Also Read: How to get company registration

Obtain the Certificate of Incorporation

Once an appropriate name is reserved, the Company must apply for incorporation. Furthermore, it must also file an online application for registration of a private limited company.

Also, the officials must draft a Memorandum of Association and Articles of Association for the Private Limited Company. The MoA describes the company’s scope of operations, lists out its objectives, and also names its activities. On the other hand, the Articles of Association describes the nature of operations of the company and explains how its administration will carry out its responsibilities. The SPICe forms should have these documents after affixing DSCs.

The satisfied RoC approves the application and the company receives a Certificate of Incorporation, which contains the PAN of the newly formed company.

Supporting Documents to Register a Private Limited Company

  • Owner NOC of the office premises if it is rented or leased
  • Utility bill from the office space
  • Copy of the lease agreement/rental agreement/property certificate
  • Form DIR-2 showing Director’s consent
  • Affidavit of first shareholders and directors via INC-9
  • Self-attested proof of identity of the first directors and subscribers

Once a company receives the Certificate of Incorporation, it becomes a legal entity and can start functioning as a Private Limited Company within India. Therefore, from then on, the directors, administrators, and promoters can commence their operations. Furthermore, the company must deposit the share capital as listed in the company’s account as soon as possible.

Besides these, you are also to do the following:

  • Maintaining a registered office: The Ministry of Corporate Affairs has made it mandatory for all companies in India to have a registered office. The registered office can be a corporate building or residential complex.
  • Board meeting: The Central Government has specified that all new registered organisations have to conduct a board meeting within the first 30 days of incorporation.
  • Letterheads: As an organisation, it is imperative that you have letterheads of your company printed. The letterhead should contain the registered office name, address, CIN, phone number, as well as email and website
  • Board outside office: A board outside is needed outside the office premises that state their name, and the registered office. This helps people find the premises easily, and helps you find new clients
  • Registering for GST: GST and IEC Code registration is mandatory
  • Opening a bank account: All new companies need to open a current account with a bank of their choice. Once done, the promoters have to contribute the prescribed subscription money
  • Share certificate issuing: All money payable by any member of the company under the Memorandum of Association or Articles of Association will be counted as a debt to the company from the particular member, according to Section 10(2) of the Companies Act, 2013. The section 56(4) of the act also dictates that company should issue share certificates to the Memorandum Subscribers within 2 months of the date of the new company registration
  • For non-residents, an FC-GPR: After reporting inward remittance, the company has to file the FC-GPR form.
  • Stamp duty: Stamp Duty has to be paid within 30 days of issuing the share certificates. The rate is different for different states.
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