What is a Private Limited Company?
A private limited company is a company privately held for small businesses.
This type of business entity limits owner liability to their shareholdings, the number of
shareholders to 200, and restricts shareholders from publicly trading shares.
What are the advantages for incorporation of Private Limited
Company in India?
1. Limited risk to personal assets
The shareholders of a private limited company have limited liability. This means that as a
shareholder you will be liable to pay for company’s liability only to the extent of the
contribution made by you.
2. Legal Entity
A PLC has a separate legal entity different from you. This means that the Company is responsible
for the management of its assets and liabilities, debtors and creditors. And you are not
responsible for it. So, the creditors cannot proceed against you to recover the money.
3. Raising Capital
Even though registering a PLC comes with compliance requirements, it is preferred by
entrepreneurs as it helps them raise funds through equity, expand and at the same time limits
the liability.
4. Trustworthiness
Companies in India are registered with the Registrar of companies(ROC) under Companies Act 2013.
Anyone can check the details of the company through Ministry of Corporate Affairs (MCA). Also,
details of all the directors are provided while the formation of the company. Hence a PLC form
of business structure is trusted more.
5. Continue Existence
A company has ‘perpetual succession’, that is continue or uninterrupted existence until it is
legally dissolved. A company, being a separate legal person, is unaffected by the death or
cessation of any member but continues to be in existence irrespective of the changes in
membership.
Steps for forming a Private Limited Company:
Looking to register your company as a private limited company? Registering
your company as a private limited company is difficult as the procedure is complicated and
involves many compliances. Do not fear as our experts can help you in every step of the private
limited company registration. Instead of reading through the entire registration process, you
can avail our expert service.
Step 1: Obtain Digital Signature Certificate (DSC)*
Step 2: Obtain DIN*
Step 3: Name Availability
Step 4: Form SPICE INC-32
Step 5: MOA and AOA
Step 6: PAN and TAN Application
* For Name availability under RUN Web service, there is no prior requirement
to obtain DSC and DIN . It can be done with account login on MCA portal.
Step 1: Obtain DSC (Digital Signature)
Digital signatures are required to file the forms for company formation. The registration
process is online and the forms require a digital signature. DSC is mandatory for all
subscribers and witnesses in the memorandum and articles of association. You must obtain the
digital signature certificates from government recognized certifying agencies. The list of such
certified agencies can be accessed here. Or you can get your DSC online in just two days from
here. The cost of obtaining DSC varies depending upon the certifying agency. You must obtain
either class 2 or class 3 category of DSC. Under Class 2 category, the identity of a person is
verified against a pre-verified database whereas, under class 3 category, the person needs to
present himself before registering authority to prove their identity. To acquire DSC
Step 2: Apply for DIN (Director Identification Number)
DIN is an
identification number for a director. It has to be obtained by anyone who wants to be a director
in a company. One DIN is enough to be a director in any number of companies.
There are 3 ways of obtaining DIN:
Option 1:File form DIN 3. This form required basic details of
the proposed director along with identity proof like PAN, Aadhaar Card, etc and address proof.
This is option is only available for existing companies. It means with effect from January 2018,
the applicant need not file DIR-3 separately. Now DIN can be applied within SPICe form for up to
three directors.
Option 2: With filing SPICe, DINs gets issued to the proposed
directors who do not have a DIN. Under this process of filing through SPICe (INC 32), maximum of
three directors can apply for DIN. If applicant want to incorporate Company with more than 3
Directors and more than 3 persons doesn’t have DIN. In such situation applicant have to
incorporate Company with 3 Directors and have to appoint new directors later on after
incorporation.
Option 3:Click on the link & let a ClearTax expert
procure DIN for you. If you go for Private Limited Company – Registration with ClearTax, up to 2
DINs are covered in the plan & there is no need to apply for DIN separately.
To get the name approval, there are following options:
Option 1:Incorporating a Company via RUN (Reserve Unique
Name) form: In an attempt to ease procedures for new as well as existing companies, the Ministry
of Corporate Affairs (MCA) has introduced RUN web service for the incorporation of a company.
RUN gives only one chance for applying and in case of rejection of the name due to any
similarity of name with a registered company, an LLP or trademark or due to non-adherence of the
Companies (Incorporation Rules) 2014, there are no second chances available. It means you have
to be sure of the proposed name and should follow name availability guidelines, existing
trademarks to avoid rejection. The applicant has to re-file another RUN form with prescribed
fee.
Please note that DSC and DIN shall not required for filling of RUN
form for reservation of name. Only MCA Account is mandatory.
However, with effect from March 23, 2018, Ministry has decided to permit two
proposed Names and one re-submission (RSUB) while reserving Unique Names for the Companies.
Option 2:You can apply for the proposed name through
SPICe(INC-32) but only one name can be applied to this form, which is similar to that of the
provision in RUN.
Moreover, in case of rejection due to non-approval of the name, the applicant
will get a second chance of refilling the same SPICe form without any further charges. It means
you get two chances of filing the same form without any extra charge of paying Rs. 1000/- both
the times.
In case of failure to get the name approved in the second go, you can file the
SPICe form again from scratch. This will any day prove to be cheaper than opting for the first
option.
The whole process including name approval and incorporation takes around 2-3 days
Step 4: Form SPICe (INC-32)
Ministry of Company Affairs has introduced Form SPICe (INC-32). It is a simplified proforma for
incorporating a company electronically. It serves the following purposes with the benefit of a
single application:
- Application for allotment of DIN (Director Identification Number)
- Reservation of company name
- Incorporation of a new company
- Application for PAN and TAN
Prior to May 2015, the registration of companies required the filling up of
several documents, such as the DIR–3 for acquiring the DIN (Director Identification Number),
INC-1 for obtaining a name, INC–7 for registering the company with the Memorandum and Articles
of Association, INC–22 for the registered office and finally, Form DIR-12 for the directors.
Now, all of these forms have been merged together.
The digital signature of a professional is required to file Form INC-32. The
professional must certify that all the information given in the form is correct. The
professional can be Chartered Accountant, Company Secretary, Cost Accountant or advocate.
With effect from January 2018, New Process of Name Approval “RUN” notified and
e-form INC-1 omitted. INC-7 form omitted. Only way out for incorporation of Company is SPICE. No
ROC fees for Incorporation of Company up to 10 lack of authorized capital.
Step 5: e-MoA(INC-33) and e-AoA (INC-34)
e-MoA refers to an electronic Memorandum of Association and eAoA is electronic Articles of
Association. These forms have been introduced to simplify the process of company registration in
India.
Memorandum represents the charter of the company while articles of association
contain the internal rules and regulations of the company.
Earlier memorandum of association and articles of association were required to
be filed physically. But now these forms are filed online on MCA portal as a linked form with
SPICe (INC-32). Both these forms must be digitally signed by subscribers to the Memorandum and
Articles of Association.
Step 6: PAN and TAN Application
Through this single form SPICe, you can also apply for company’s PAN and TAN by using forms 49A
for PAN and 49B for TAN. The system will auto-generate these forms after the submission of SPICe
form. All you have to do is download it, affix digital signatures and upload both forms on MCA
portal
If all the details in the form are duly filled in along with the required documents, MCA will
approve the registration and a CIN (Corporate Identity Number) will be allocated. You can also
track this CIN online on MCA portal.
Documents required for filing SPICe (INC-32)
The following documents must be filed with SPICe (INC-32) for the
incorporation of a company:
A. Where director and subscriber are Indian Nationals
- An Affidavit on a Stamp Paper is to be given by all the subscribers of the Company to state
their willingness to become the shareholders of the Company
- Proof of office address – Rental Agreement
- Copies of utility bills that are not older than two months
- Copy of approval in case the proposed name of the company contains any word(s) or
expression(s) that require approval from central government
- If the proposed name is based on a registered trademark or is subject matter of an
application pending for registration under the Trade Marks Act, then it is mandatory to
attach the trademark registration certificate or trademark application copy
- NOC from
the owner of the property
- In case of subscribers/ Director does not have a DIN, it is mandatory to attach, proof of
identity and address proof of the subscribers
B.Where director/subscriber is a foreign National
- Passport
- Address proof: It can be driving license, residence card, bank statement, Government
issued form of identification containing an address
Registered office proof: It can be registered document which shows the title of the premises in the
name of the company or notarized copy of lease deed or rental agreement
What is the Cost involved in Private Limited Company Registration?
The following is the government fees required for registration:
Stamp Duty (approx)
₹ 2500
Govt Fees (RUN, PAN, TAN)
₹ 1200
Goods and Services Tax @ 18%
₹ 684
What is the Time required to register a company?
The whole process including approval of DIN, Name, and Incorporation takes around 7 working days.
However, now-a-days registering a Company has become a fast process as all documents are dragged in
a single application form with MCA. It is a big step towards e- governance and for businesses who
are looking for expansion of operations.
Frequently Asked Questions
Q. What are the prerequisites to incorporate a Private Limited Company?
A. The prerequisites for the incorporation of a private limited company are that:
-
The number of members must be between 2-200.
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There must be at least two directors and two shareholders
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Each director must have a Directors Identification Number (DIN)
-
PAN card copy of directors/shareholders. Passport copy for NRI subscribers.
Q. Can the private company be incorporated with a residential address?
A. Yes. The company needs to provide address proof for incorporation. But the Ministry of
Corporate Affairs (MCA) allows a residential address to be used as the company’s registered
address. Thus any address can be provided as the registered address.
Q. What are MOA and AOA?
A. Memorandum of Association (MOA) is defined under section 2(56) of the Companies Act 2013.
It is the foundation on which the company is built. It defines the constitution, powers and
objects of the company.
The Articles of Association (AOA) is defined under section 2(5) of the Companies Act. It
details all the rules and regulations relating to the management of the company.
Q. What are the attachments to Form 8?
A. The following documents must be attached with Form 8:
-
Disclosure under Micro, Small and Medium Enterprises (MSME) Development Act, 2006 is
a mandatory
attachment.
-
Statement of contingent liabilities to be attached in case any contingent liability
exists.
-
Any other relevant information can be provided as an optional attachment.
Q. How is SPICe INC 32 different from INC 29?
A. SPICe INC 32 is very similar to INC 29, which was being used to incorporate companies.
Both
forms quicken the process of incorporating the company. However, the significant difference
between the two forms is that in the new SPICe INC Form 32, there is a provision for
entering name approval that was already obtained by the applicant, whereas in the form INC
29, there was no provision for entering a previously obtained name approval leading to
chances for submission and rejection.
Q. Is there a limit on the number of directors that can use the SPICe INC 32 for obtaining
DIN?
A. For the incorporation of the company, a maximum of three directors can use the integrated
form for filing application for allotment of DIN.
Q. Are PAN and AADHAR mandatory?
A. No. The Companies (Incorporation) Third Amendment Rules dated 27th July 2016 has relaxed
the mandatory attachment of proof of identity and residence in respect of a subscriber
having a valid DIN.
Q. Is it mandatory to file eMOA and AOA along with SPICe INC 32?
A. Yes it is mandatory to file eMOA and eAOA in the following circumstances
-
individual subscribers are Indian nationals
-
If individuals subscribers are foreign nationals, then they have a valid DIN and DSC
and also submit proof of a valid business visa
-
non-individual subscribers based in India
Q. In what circumstances are physical copies of MOA and AOA required to be signed and
attached?
A. Physical copies are needed to be signed and attached in case non- individual first
subscribers are based out of India, or individual foreign subscribers do not hold a business
visa. It is to be noted that If physical MOA and AOA are filed, then there is no need to
attach eMOA and eAOA.
Q. How are PAN and TAN communicated to the user once SPICe INC 32 is accepted?
A. On acceptance of SPICe forms, the Certificate of Incorporation (COI) will be issued with
valid PAN and TAN as allotted by the Income Tax department. An email with the COI as an
attachment along with PAN and TAN will be sent to the applicant. PAN and TAN in the email
will be held valid as the requirement for a laminated card for PAN has been done away with.
