Private limited company is the most popular corporate entity amongst small, medium and large businesses in India due to various advantages.
Private Limited Company is the most prevalent and popular type of corporate legal entity in India. Private limited company registration is governed by the Ministry of Corporate Affairs, Companies Act, 2013 and the Companies Incorporation Rules, 2014. To register a private limited company, a minimum of two shareholders and two directors are required. A natural person can be both a director and shareholder, while a corporate legal entity can only be a shareholder. Further, foreign nationals, foreign corporate entities or NRIs are allowed to be Directors and/or Shareholders of a Company with Foreign Direct Investment, making it the preferred choice of entity for foreign promoters.
Unique features of a private limited company like limited liability protection to shareholders, ability to raise equity funds, separate legal entity status and perpetual existence make it the most recommended type of business entity for millions of small and medium sized businesses that are family owned or professionally managed.
Separate Legal Entity
Private Limited Company is a legal entity and a juristic person established under the Companies Act. Hence, a company has a range of legal capacities including opening of a bank account, hiring of employees, taking on equity or obtaining licenses and more as an independent corporate entity. The members (Shareholders/Directors) of a company have no personal liability to the creditors of a company for company's debts.
Private Limited Company has 'perpetual succession', meaning uninterrupted existence until it is legally dissolved. A company being a separate legal person, is unaffected by the death or other departure of any member and continues to be in existence irrespective of the changes in ownership.
Private Limited Companies can raise equity funds in India. Companies can also issue equity shares, preference shares, debentures and accept deposits with RBI permission. Banks and Financial Institutions prefer to provide funding to a company rather than partnership firms or proprietary concerns.
Ownership of a business can be easily transferred in a company by transferring shares. The signing, filing and transfer of share transfer form and share certificates is sufficient to transfer ownership of a company. In a private limited company, the consent of other shareholders maybe required to effect share transfers.
Private Limited Company being an artificial person, can acquire, own, enjoy and alienate, property in its name. The property owned by a company could be machinery, building, intangible assets, land, residential property, factory, etc., No shareholder can make a claim upon the property of the company - as long as the company is a going concern.
Obtaining DSC & DIN
Digital Signature Certificate(DSC) and Director Identification Number(DIN) is required for the proposed Directors of the Private Limited Company. DIN and DSC can be obtained for the proposed Directors within 5 to 7 days.
A minimum of one and a maximum of six proposed names must be submitted to the MCA. Subject to availability, naming guidelines and MCA processing time, Name Approval can be obtained in 5 to 7 working days.
Registration documents can be submitted to the MCA along with an application for registration. MCA will usually approve the application for incorporation in 5 to 7 days, subject to their processing time.