Starting A Private Limited Company In India And The Documents To Be Include
A private limited company is an enterprise that offers legal protection or limited liability to its shareholders. However, there are some restrictions on the ownership, for example:
- The number of shareholders cannot be more than 50
- The shareholders cannot buy or sell shares on their own; they would have to offer it to other shareholders for purchase
- The shareholders do not have the right to sell their stocks through the medium of stock exchange to the general public
Starting a private limited company in India has become quite easy because you can find all the required information online. Anybody can start a private limited company and build it into a scalable business. And thanks to the availability of outside funding, it is now possible for an enterprising entrepreneur to start, register and run his company. Have a look at some of the advantages of running a private limited company (PLC) in India:
- Limited liability
- Easy to manage the transferability of shares
- Credibility is much greater
- Continue to exist
It is easily possible for PLCs to accommodate equity funding, so there is no worry about investment. Private equity funds and venture capitalists are ready to invest in PLCs. If it was Limited Liability Partnership (LLP) then you have partners, while in a One Person Company (OPC), there would only be a single owner.
The term ‘limited liability’ means the company is legally responsible for only a limited amount of debts. The liabilities of the members of the company are also limited, when compared to the liabilities faced by partnership companies and proprietorships. The liability here would depend on the face value of the shares they have bought.
Easy to manage the transferability of shares
It is possible for the shareholders to transfer the shares of the company without any hassles. This is done along with the share certificate, and is much easier when run as a proprietary business or partnership.
Credibility is much greater
A PLC is credible to the public, thanks to the compliances that they have to follow from the beginning. When you compare with LLPs, the compliances start much later, only when the turnover crosses a certain limit.
Continue to exist
A PLC would continue to exist even if one of the shareholders pass on. As it is a company, it will keep running until it is dissolved as a complete entity in its own right.
Now that you understand the basics, you would be ready to start a company in India. There are several agencies that would help you start a private limited company in India, and you can approach any one of them. You need to get the documentations and the paperwork in the right order before you can start the process. Any errors in the application forms will cause them to be rejected. The process of company registration is a three-step process. If you follow the advice of a credible agency, you can finish the registration process within 14 days. Of course, this depends on the workload of the Registrar of Companies (RoC). If there is any discrepancy in your application, then it is likely to be rejected.
The three steps:
- One of the first steps in starting your own PLC is to have:
- A Digital Signature Certification (DSC)
- Identity proof
- Address proof
- Completed Class II form
The name of your company’s directors must always be there in the electronic documents and hard copies. It is important to have a Class II Digital Signature Certificate (DSC) as well; this can be had from any of the vendors appointed by the Ministry of Corporate Affairs (MCA). These vendors act as certifying authorities.
As the second step, you begin to search for the availability of your company name. You can also do this simultaneously with your DSC application. It is often difficult to get the approval with the company name that you have been waiting for, but it would serve some consolation if you get to learn that your company name need not be your brand name. Several well-known companies do not have the same brand name and company name.
If your DSC gets rejected, then it must because:
- You failed to check for spelling mistakes
- You added prefixes, which are not allowed
- Written in abbreviated names, which are also not allowed
- Submitted old utility bills, instead of the latest one
Each step of this registration costs money, but it is never too much. You may have to pay the agency an amount of Rs. 1500, depending on the process and requirements.
Finally, you need to get your documents in order:
- The DIN application (This application can be filed by three directors with scanned pass-port size photos, soft copy of Driver’s License, PAN card and so on)
- MoA and AoA (It is the Memorandum and Articles of Association that would contain the major details of your business and drafted by the lawyer and self attested)
- Name approval (Settle on a good name before you get the documents for approval)
- Registered Office Verification (Provide details of the registered office and address, including the latest utility bill)
- Appointment Letters and Declarations(Contains declaration by the first director and letters of appointment of the CEO, directors and managers)
There is another important file that you need to file. It is called the INC-29 form and must be filed carefully. Suppose, there are five errors in your form and you corrected only four, the form will be rejected. Resubmission of the form can be done only once, so you have to be really careful. To get things in order you need to pay RoC fees electronically. The stamp duty would of course, vary from location to location. In certain states, for example Kerala and Punjab the cost is much higher.
Interesting links about the topic:
Documents Required for Registration of a Private Limited Company in India
Procedure for company formation in India
Pictures: Flickr.com/ Ken Teegardin/ Sherwood CC
The author: Reema Oamkumar is engaged as a thought leader at Software-Developer-India.com which is a part of the YUHIRO Group. YUHIRO is a German-Indian enterprise which provides programmers to IT companies, agencies and IT departments.