Advantages of Private Limited Formation

A Private Limited company or an Limited is a type of small business entity. This is one of the most, if not the most, popular business structures out there. The popularity of the Limited stems from the fact that it is an entity unto itself. This means that it is an actual legal entity recognised by the government as though it were its own person, and this reason right here is where all other benefits of an Limited stem from.

Easy to Form - Incorporating a Private Limited Company is quite simple. Two people can form a private limited company in 7-10 days.

Limited Liability - Shareholders would be liable to any financial risks only to the extent of capital invested by them in the company.

Easy Access to Funds - Private Limited Companies can receive funds and issue share or debt instrument to the investor. It is the most preferred form of entity for Venture Capital investments.

Easy to expand - Private companies can be converted into public companies. This gives it the flexibility to expand and even go for Initial Public offerings in the long run.

Elevated Legal Status - Private Limited Companies’ artificial person status allows it to enter into a contract, sue and also be sued without holding the members or directors liable.

Share Valuation - Since Private Limited companies have the concept of shareholding, it can be valued to show company’s financial strength and makes it easy for allotting shares to investors and employees.

Enhanced Brand value - Private Companies benefit from better brand exposure compared to One Person Company or Limited Liability Partnership.

Easy to Exit - If for some reason a company is not doing well, the promoter has the option to exit the business. Fast Track Exit (FTE) is one of the main highlights of a Private Company that allows winding up in 3 months time.

Continuity of Business - The private limited company can be closed only by a formal winding up the process; This ensures continuity of business and there is no question of renewals.

Pre-Incorporation Requirement

For a Private Limited company it is a mandatory requirement before incorporation to have:

At least 2 Promoters - Promoters can be individual or body corporate.

At least 2 Directors- Director can be an individual only.

Digital Signature Certificate - All filings to the Registrar of Companies are made through the online application system appended with a valid Digital Signature Certificate (DSC). All the subscribers / first shareholders of the company must have valid Digital Signature Certificate (DSC) issued for the filings.

Company Name- The name of a Private Limited company shall end with the words 'Private Limited'. Proposed Company Name shall comply with the Company Name Availability Guidelines under Companies Act 2013.

• Class 2 Digital Signatures

• Director Identification Number

• Authorized Capital - Up to Rs 10 lakhs

• Incorporation Fee

• Stamp Duty

• Memorandum of Association (MOA)

• Articles of Association (AOA)

• Certificate of Incorporation

• Income Tax - PAN

• Income Tax - TAN

• EPF Registration

• ESI Registration

Document Required

Copies of Documents Required from Directors and Shareholders.

• Pan Card - PAN Card of shareholders and Directors. Foreign nationals must provide a valid passport.

• Registered office Proof - Latest Electricity Bill/Telephone Bill/Water/Gas Bill of the registered office address.

• Identity Proof - Aadhar card/Voter ID/Passport/Driving License of Shareholders and Directors.

• NOC from Owner - No Objection Certificate to be obtained from the owner(s) of registered office.

• Address Proof - Latest Telephone Bill/Electricity Bill/Bank Statement /Gas/Water Bill of Shareholders and Directors.

• Rent Agreement - If Property is taken on Rent, then rental agreement required.

• Photograph - Latest Passport size Color photograph of Shareholders and Directors.