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What is the step by step procedure for Private Limited Company Registration
Divyanshu Gupta
| Updated: Mar 28, 2020 | Category: Private Limited Company

What is the step by step procedure for Private Limited Company Registration

Are you confused about which Business Model is best suited to you? Do you have a clear Vision and Mission of business but unable to kick start it due to lack of clarity on Business Model? If these are the questions that create trouble for you, then you are at the right platform as this platform will clear your doubts and step by step for procedure for Private Limited Company Registration.

Overview of Private Limited Company Registration

Before proceeding, it is imperative to understand what Private Limited Company is all about? Well, Private Limited Company is a corporate legal entity which is popular in India and is undertaken by small businesses privately. It is a legal structure in which the owner’s liability is limited based on shareholdings which is governed by Ministry of Corporate Affairs[1] and is incorporated under Company Act 2013. Further, it can have maximum 200 shareholders. Moreover, the possibility of publicly trading shares is ruled out as the shareholders are prohibited from doing it. 

Conditions to form Private Limited Company

There are some prerequisites which are required to form Private Limited Company which are highlighted below-

Private Limited Company can be registered when there are two Directors and shareholders where a corporate entity/natural person can be shareholders in it. Only a living person can be a Director in a Private Limited Company and out of the two Directors, one must be an Indian citizen and attained the status of an Indian resident. Now, the obvious question comes who will be considered as an Indian resident? An Indian resident will be the one who stayed in India for more than 186 days a year. An additional cost is required to be incurred on per annum basis towards additional ROC compliance. The extra cost is between INR 5,000 to 10,000 per annum. As already stated, maximum 200 members can create a Private Limited Company. INR 1,00,000 is required to be ploughed if one wants to start Private Limited Company.

Advantages of Private Limited Company

When it comes to registering a Private Limited Company, it has more advantages, unlike LLP or Partnership. Have a look at what benefits does Private Limited Company offer-

Transferability is easy

Any legal entity partially or wholly can avail the ownership of Private Limited Company as Shares decides the ownership of a Company. The national border does not matter here as it can be a foreign entity or an entity within the country. As you must be aware that Shareholders control board of Directors, the possibility of replacing Directors is possible, which is necessary to carry out the business successfully at all times.

Separate Legal entity

Since it has a separate Legal entity from its owners, it is legally recognized. Its unique name can be held for PAN, Licenses, approvals, contracts and so on.

Raising Equity capital

The funds can be procured from shareholders who are willing to be a shareholder in a Company. VC funds, Angel Investors etc. are good sources of obtaining funds, especially for Private Limited Firm. Hedge Funds also act as a handy source of fund.

Perpetual existence

Since it is perpetual, it never ends, but it can lose its existence only at the time of winding up. The process of winding up can be carried out by Government or Promoters. The winding-up of a business is the last resort as it generally happens in the case of non-compliance.

Limited liability

Shareholders of Private Limited Company enjoy limited liability which means in case of mishappening of Company; the shareholders will be least affected as they have limited liability and makes an impact on the Company.

By now you must have understood about Private Limited Company. You must have gained a fair idea regarding conditions to form Private Limited Company. A fair amount of knowledge must have been gathered till now. Enough momentum has been gained regarding Private Limited Company.

Procedure for Private Limited Company Registration

Now, it’s time to dive into the details of step by step procedure for Register Private Limited Company. Have a look at it given below-

Obtain DSC

The preliminary step in Private Limited Company is obtaining Digital Signature. Memorandum of Association and Articles of Association necessitate all the subscribers as well as the witnesses to obtain Digital Signatures. The government recognized Certifying Agencies that enable DSC.

Name Application

Form Spice-Part A is the new form that came into existence against earlier Form RUN. It is followed only when name is finalized. Spice-Part A is a form which gives an option to fill one name only.

Creation of Memorandum of Association

Constitution of the Company is defined by Memorandum of Association. It includes mandatory clauses which are required so that the Company can come into existence. The brief components stated in Memorandum of Association are as follows-

  • Name clause
  • Object clause
  • Registered Office clause
  • Liability clause
  • Capital clause 

Defining Article of Association

The internal working of the Company is governed by Articles of Association. In other words, it won’t be wrong to say that Article of Association defines the internal rules as well as regulations of the Company. 

Two vital components in Registration of Private Limited Company are Memorandum of Association and Article of Association which has its own benefits, if prepared by the experts.

Filing SPICE-Part B

Spice-Part B is about the disclosing the details of the Directors and the Shareholders. It also includes the details like Registered Office which is of primary importance. The proposed objects of the Company are also included in it as it has a strategic importance. The other important documents must be accompanied with SPICE- Part B required for Registration.

Formalities related to AGILE-Pro

Private Company needs to file AGILE- Pro which must include the details pertaining to GST, ESIC as well as EPF Registration. The details related to Professional Tax Registration are required additionally in case of Maharashtra. It also includes the details related to opening of bank account which Private Company needs to open in a bank.

Declaration in SPICE-9

SPICE-9 is a form where the Directors and Shareholders are required to give a declaration that they do not have any record of conviction. Further, it is also disclosed that the information provided by them is also correct.It holds true for the documents provided by them as well.

Issuance of Incorporation Certificate

Incorporation Certificate is issued by the authorities, if it finds all the documents as well as details supplied along with the Application are true as well as correct. PAN and TAN are also issued.       

Conclusion

In a nutshell, it can be concluded that Private Limited Company Registration involves a legal structure in which the owner’s liability is limited on the basis of shareholdings. It is governed by Ministry of Corporate Affairs and is incorporated under Company Act 2013. Moreover, when it comes to registering a Private Limited Company, it has more advantages, unlike LLP or Partnership. If you are keen to establish Private Limited Company or need any assistance related to it, consult Swarit Advisors; your trusted Legal and Financial Partner.
Divyanshu Gupta

A prolific writer with more than 10 years of experience across various industries like Ecommerce, Publication Houses, Information Technology and Digital Advertising firm. Good amount of knowledge for writing on various topics gives me an edge and enables to mentor and guide others in the same field. The passion to never say no gets me going and motivates me to set new benchmark for myself and perform with great zeal and endeavour.

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