Online Company Registration in India - An Overview
Company Registration in India - A Private Limited Company commonly known as Pvt. Ltd. Company or in short Company is the most common business corporate structure in India. It is governed by the Companies Act, 2013. The owners of a Private Limited Company are called shareholders. And to form a Private Limited Company a minimum of 2 shareholders and 2 directors are required. As a mater of fact, the shareholders can be directors too. Though the limit is a maximum of 15 directors and 200 shareholders. Beyond that a Private Limited Company must be transformed into a Public Limited Company. Private limited companies offer more protection to shareholders than a partnership or sole proprietorship, but they also require more paperwork and compliance with government regulations.
Features of an Pvt Ltd Company
- It is a separate legal entity so there is a clear distinction between the shareholders's assets and company assets, hence the company's members (shareholders or directors) are not personally liable for the company's liability.
- The liability of shareholders and promoters is limited to the contribution made by them into the company as share capital.
- Greater credibility for your business.
- No requirement for minimum capital contribution.
- A Pvt Ltd Company will continue to exist until it is legally dissolved, which means it is unaffected by the death or other departure of any of its members. Hence it has the ability to do perpetual succession as it will continue to exist regardless of membership changes.
- It is the only way to raise funds from the Venture Capitalists, Angel investors, Private Equity Funds, Foreign Funds, NBFCs, Banks and other financial institutions other than a Public Limited Company.
Just like a Private Limited Company, an LLP is also a corporate structure. A minimum of 2 partners are needed to incorporte an LLP. There is no upper limit on the maximum number of partners of LLP. Among the designated partners which should be minimum two, one of them must be an Indian resident.
The LLP is governed by the LLP Act 2008 and the duties, profits and losses of the LLP are governed by the LLP agreement or deed. The LLP Deed must have proper documentation on partner contribution as well as commitments as well as penalties for the partners if rules are broken.
Benefits of an Pvt Ltd Company Registration
Limited Liability
One of the main advantages of incorporating a Company is that the liability of the shareholders and promoters is limited to their capital contributions. This means that the personal assets of the partners are generally not at risk if the business incurs debts or faces legal issues.
Separate Legal Entity
A Private Limited Company is a separate legal entity from the shareholders and directors as per the Companies Act, 2013. This means that it can enter into contracts, own assets, and incur liabilities in its own name.
Uninterrupted Existence
A Company will continue to exist until it is legally dissolved, which means it is unaffected by the death or other departure of any of its members. Hence it has the ability to do perpetual succession as it will continue to exist regardless of membership changes.
Ability to raise capital
A Private Limited Company can raise capital by admitting new shareholders or from Investors, Venture Capitalists or Private Equity Firms by issuing debentures, shares, which can be helpful for businesses that need additional funding. 100% FDI is also permitted for Private Limited Company naturally as a mater of fact there is no restriction on foreign shareholding of a private limited company. Hence most of the foreign subsidiaries of MNCs are registered as Private Limited Company.
Eligibility Criteria for Private Limited Company Registration in India
To incorporate a company, one should meet the following criteria:
- A minimum of two members are required to form a private limited corporation. They are called shareholders and they can be the directors too.
- Out of them atleast one director should an Indian Resident which means they must have spent at least 182 days in India in the previous calender year
- Only an Individual can be appointed as a Director in a Company. A body corporate or business entity cannot be appointed as a Director in a Company
- Directors must have DSC or Digital Signature Certificate
- A Private Limited Company must have a unique name that should not be similar to any existing Company or Trademark and must not contain any offensive or reserved words
- A Private Limited Company must have a Proper Principal Place of Business in India or registered office that must be submitted to the company registrar following the completion of the registration process. The primary location must keep all the documents of the company.
Capital Required to Start a Company
One of the main advantages of incorporating a Company is that there is no minimum capital required to start a private limited company. Which means there is no fixed amount to incorporate a Company. The shareholders can determine whatever they can invest to setup their Company. Though a minimum of Rs.10,000 is recommended in the initial stage to start a Company.
What is Authorised Capital of a Company?
Authorised Capital of a Company is the total value of shares a Company can issue to its shareholders. Generally, Companies are incorporated with an authorised capital of Rs. 1 Lakh which which means, the company can issue shares with any face value but the total value of the shares cannot go beyond Rs. 1 Lakh. If a company requires authorised capital of more than 10 Lakh, the company has to pay additional fees to the regulatory body MCA. The authorised capital of a company is not bound to the initial agreed authorised capital, it can be increased any time after incorporation.
What is Paid-up Capital of a Company?
Paid-up Capital of a Company is the total value of shares a Company has issued to its shareholders. In other words, it is the amount of money, the investors have given the company by buying a share of that company.
Documents required for Online Company Registration
As per MCA guidelines, to incorporate a private limited company, proper identity and address proof of the directors and the business is required. Listed below are the documents acceptable by the MCA as per the Companies Act.
Document Required for Directors
- Scanned copy of PAN Card for Indian Residents
- Scanned copy of Passport for Non-Indian Resident
- Scanned copy of Aadhaar Card or Voter's Card or Driving License
- Scanned copy of Latest Bank Statement or Telephone bill or Postpaid Bill or Electricity Bill or Notarized Rent agreement for address proof
- Passport size photograph
Document Required for Registered Office
- Scanned copy of NOC from Landlord/lady
- Scanned copy of Notarized Rent Agreement
- Scanned copy of any Utility Bill
- Scanned copy of Sale deed in case of Owned Property
Company Registration Process in India
Step 1: Obtaining DSC
Private Limited Companies in India require its directors to have a Class 3 Digital Signature Certificate (DSC) from a registed Certifying Authority. Get your DSC here and register your DSC in MCA Portal.
Step 2: Application for DIN
DIN Stands for Director Identification Number. As soon as Directors obtains DSC, they have to apply for DIN in the MCA Portal. If a director already has DIN or DPIN number then they do not need to apply for DIN. Also it is required to submit the details for the directors where they are a director or partner in an existing incorporated firm.
Step 3: Application For Name Approval
Simultaneously apply for Name approval for the Company using RUN form in MCA Portal. While reserving the name it is recommended to put names that are not similar or identical to other companies and trademarks. But if somehow you cannot choose other name, an NOC is required from the similiar named company to get approved.
Step 4: Drafting MOA & AOA
MOA stands for Memorandum of Association and AOA stands for Articles of Association. These are the charter documents that dictate the working principals, liability and understandings of a Company. Draft a MOA and a AOA with the help of a legal expert.
Step 5: Incorporation of Company in India
After name approval, fill the SPICe+ form in the MCA portal with details of the Business, Directors, MOA & AOA. And then file it with necessary documents such as id proof and address proof, as prescribed by the MCA Portal. The registrar will register the Company in a week if every thing is according to the Companies Act. Post approval, a Certificate of Incorporation will be issued in digital format from the Central Registration Centre of MCA.
Step 6: Application for PAN Card and TAN
In the SPICe+ form choose the necessary actions to get PAN Card and TAN for the Company.
Step 7: Getting Company Incorporation Certificate
Congratulations on the newly incorporated Startup. Now maintain the compliances and you are good to go.
Private Limited Company Compliances
As soon as a Company is incorporated, it is required to maintain certain rules and orders known as compliances to avoid penalties and prosecution. The following are the compliances a company has to mandatorily maintain in order to engage in doing business.
Auditor Appointment Within 30 days of a Company being incorporated, it is required to appoint a Auditor or a Chartered Accountant having a valid practice license from the ICAI body.
Commencement of Business Within 180 days of a Company being incorporated, it is required to open a Bank Account and the shareholders are required to deposit the subscription amount specified in the MOA of the Company. Which means if a Company has been incorporated with a paid-up capital of Rs. 10000, then its shareholders are required to deposit that amount within 180 days of its incorporation into the Company's bank account. The company is required to file a statement of the accounts to the MCA to obtain a commencement of business certificate.
Director DIN KYC The directors of a company are mandatorily required to complete DIN KYC each year with the MCA.
MCA Annual Filings All incorporated Companies in India are required to file a copy of the financial statement with the Ministry of Corporate Affairs or MCA every financial year. Though Companies incorporated between January and March can file their first annual return next year as a part of the next financial year’s annual filing. The MCA annual filings consists of Form MGT-7 and Form AOC-4. Both of them must be digitally signed be the directors and licensed practicing professionals.
Income Tax Filing All companies are required to file income tax return by using Form ITR-6 each financial year irrespective of the incorporation date and revenue. The income tax return must be digitally signed by one of the directors of the Company and must be submitted before the deadline.
