When starting a business, picking the right company structure is quite important. It allows you to streamline various business operations and grow more. If you have a business idea in mind and want to start a business in India, registering your business into a specific type of company is mandatory as per legal compliance (Source).
There are various types of companies that can be registered under the Companies Act, 2013, one of which is a private limited company. If you want to dig further and understand more about starting a private limited company, this complete guide has all you need.
Let’s start with the basic definition of a private limited company.
What do you mean by a private limited company?
A private limited company refers to a privately held, legally-recognized business entity that is owned by private stakeholders. The legal terms of this type of company are defined as per Section 2(68) of the Companies Act, 2013. Besides this, it ensures financial transparency and limited liability to the shareholders (in relation to the number of shares held by them).
You should also know that:
- Private limited companies are further classified into different types, be it limited by shares, limited by guarantee, or unlimited companies.
- It can have 200 members at most.
- You can start a private limited company with a minimum of two directors.
Online Payments for Private Limited Companies
What are the primary characteristics of a private limited company?
The following characteristics define a private limited company:
| Parameter | Description |
| Membership | Like many other types of companies, a minimum of two shareholders are required to start a private limited company. |
| Limited liability structure | The liability of each shareholder or member of a private limited company is limited. However, their individual and personal assets are not at risk. |
| Separate legal entity | It is a separate legal entity that continues to exist in the eyes of the law in perpetual succession. |
| Minimum paid-up capital | To start a private limited company, you need to maintain a minimum paid-up capital of Rs. 1 lakh. |
Also Read: Differences between Paid-Up and Authorised Capital
Advantages of starting a private limited company
- When you start a private limited company, you (as a company member) will have limited liability. It also means that the company members are not at risk of losing their personal assets.
- Unlike a public company that requires a higher number of shareholders, you can start a private limited company with just two shareholders.
- A private limited company enjoys uninterrupted existence and stays alive as a legal entity until it shuts down completely. It continues to exist even after the departure or death of any core member.
How to start a private limited company: requirements
Every type of company has a certain set of requirements for its incorporation. To start a private limited company, the requirements are as follows:
| Requirement(s) related to | Description |
| Members and directors |
|
| Name of the company |
|
| Registered office address |
|
| Other requirements |
|
Documents required to start a private limited company
You will need the following documents to start a private limited company:
- Identity proof of Indian and foreign directors
- Address proof (Aadhar card/Driving license/Ration Card/Voter ID)
- Proof of residence (Electricity bill or bank statement)
- Notarized rental agreement
- NOC or No Objection Certificate from the property owner
- Sale deed or property deed copy
Steps to start a private limited company
Once you are done with finalizing the company name for your business idea, follow the steps given below to start a private limited company:
- Apply for a Digital Signature Certificate (DSC)
- Apply for the DIN
- Check and apply for the availability of your company name
- File EAOA and EMoa for the registration of your company
- Apply for the TAN and PAN for your company
- Open a current account for your company
You May Also Like to Read: Why Articles of Association are Important For New Companies?
With this, you are all set to run and grow your private limited company.
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FAQs
Is it better to start a private limited company than an LLP?
Both these types of companies have their own pros and cons. In relation to investment in the long-term, many individuals consider a private limited company better than an LLP. You are advised to know the differences between the two before you register your company.
How many people do you need to start a private company?
To start a private limited company, you need a minimum of two members and two directors. The maximum number of members can be 200 in this case.
How much does it cost to register a private limited company?
The total cost of registering a private limited company depends on the number of directors, members, and authorized share capital. In general, the basic cost can range from Rs. 5,000 to Rs. 30,000.
What is compulsory for a private limited company?
It is mandatory for all private limited companies to hold an annual general meeting within six months from closing their financial year. This is defined under Section 134.
