Of all forms of initiating a business, incorporating a private limited company is the most sought after type in India. Essentially floated &managed a private group of individuals, this structure of the business is closely held &refrain itself from entering the public domain. It only requires a minimum of 2 and a maximum of 200 members to form a private company. The credibility extended to a legally incorporated company paves its way for easy outside funding and investments.

Reasons why you should go for a private limited company

It holds many relatable reasons for start-ups or even an established business as to why a private limited company is the first choice for a business to begin a business. Let’s check out the privileges endowed to a private company:

  • Easy access to Investment: Since a private company gathers much recognition than a sole proprietorship or partnership, it is easier for banks and other financial institutions to enter into loan arrangements with them.
  • Limited Liability: Undeniably the best part about a private limited company is a liability, which is only limited to the amount invested by the promoters/directors.
  • Lesser Compliances and returns– As in a public company, the financial results are mandatorily required to be disclosed on regular intervals during a year. However, a private company saves itself from all that humongous compliance part. It only limits itself to annual disclosures and skips on those gigantic corporate governance rules in case if a company is publicly traded.
  • Better Control: Since privately managed, there is better management of affairs in a private company without any interference from any outside party or shareholders, unlike public companies where each and every decision needs to be approved by the stakeholders.
  • Limited capital: The business start-up doesn’t need a high-end investment to acquire a legal shape. With a minimum of 1 lac in your hands, you are well funded to start the business, however, the cost of running and managing company affairs leads you to banks and private investors, which actually determines the worth of your business idea and its growth in the long term.
  • Easy dissolution and wind up: As it is easy to form a private company, it is equally simple to dissolve one in case the business ceases to grow. With only board resolving to shut the company, and passing a resolution, the company may go into the dissolution process.

Requirements &Documents Checklist

Minimum Requirements:

  • Minimum 2 shareholder
  • Minimum 2 directors
  • Director Identification number for all directors
  • At least one director should resident in India.
  • DSC to be obtained for both the directors. 

Documents Required:

  • Directors’ PAN card
  • Passport size photo of all directors.
  • Copy of Rent Agreement for purpose of Registered office (in English)
  • Property proofs (if owned)
  • Utility Bills of the business premises
  • No objection certificate to carry business in rented premised, in case rented.

Process of Incorporation

With the latest reforms in line with the concept of Ease of doing business in India, the process of registering a business/company has been much simplified. Where earlier, there was a separate form at every stage (namely DIN, Name approval, Incorporation and statutory numbers like TAN/PAN), now the emergence of the SPICE Scheme has led to unbelievable access and ease of incorporating the business. SPICE stands for simplified Performa for incorporating the company electronically. It became operational from 1st October 2016.

Step 1: Obtaining DSC for all the directors from a recognized certifying agency.

Step 2: Uploading DSC on MCA’s Website, also known as ROLE CHECK.

Step 3: Filing SPICE (e-form 32) on MCA’s website covers the following aspects of company incorporation:

  • Application of DIN (up to 3 directors) can be directly made in SPICE.
  • Application for the availability of name, where the name should be indicative of the business proposed to carried out by the promoters.
  • Doing away with requirement of filing DIR 12 for appointment of first directors. SPICE covers up for these provisions and provides the facility in single form.
  • Doing away with filing INC 22 for a registered officer.
  • The integration of MCA21 with CBDT has also eased the allotment of PAN & TAN for fresh incorporations and has to be applied in SPICE form itself.
  • Electronic MOA (Form 33) & AOA (Form 34) has done away with filing the signed scanned copies of MOA &AOA as earlier.
  • However, where earlier only one DSC amongst two of the directors was required, now DSC has to be obtained for all the directors. The subscribers to Memorandum will have to affix their digital signatures to the e-MOA & e-AOA.
  • The time consumption as compared to earlier incorporation process has been reduced to just 1-2 days.
  • Since all the information and documents are submitted in one go and may have chances to err, two re-submissions are allowed to rectify mistakes.

The central government in order to ease out the establishment of businesses in India, has taken several measures to simplify procedures over last few years. In pursuing the same, a Central Registration Centre (CRC) in National Capital Region (NCR) is also set up to look after the incorporation proceedings separately. Also, there has been a considerable reduction in statutory fees. The name availability rules have been made simpler with company seal being made optional. The continuous efforts by the government in the tandem Ministry of corporate have fairly accentuated the horizons for business ideas and their real time implementation while maintaining the regulatory framework intact at the same time. Also, India has been considerably performing well on the World Bank’s index of Ease of doing business globally. As of October 2016, it stood at 130th position, jumping 12 places higher as compared to the previous year.

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