Private Limited Company: Startups Favor & Why?

A Private Limited Company is the desirable structure for most Indian startups and other growth-oriented businesses. It provides limited liability, enhanced credibility, shareholding flexibility and easier access to investors. Yet many founders find themselves lost navigating registration’s legal activities and paperwork.

The good part is the process has made simpler and completely online through the MCA (Ministry of Corporate Affairs) portal. If you follow the order correctly, registering a Private Limited Company in India is not a legal nightmare but an organised and doable process. This guide takes you through everything in plain language so that you know exactly what to expect.

Step 1: Determine the Founders, Money and Other Basics

Before you get going with any online filing, you need to have a few straightforward answers about your business. A Private Ltd Co can be incorporated with a minimum of two directors and shareholders. It is permissible for one person to be a director and shareholder, but not recommended.

You will also need to determine the authorised share capital, which is the maximum amount of new shares your company can legally issue, as well as the paid-up capital, being the actual cash or assets that shareholders have invested at incorporation. In most cases, a startup starts with the minimum authorised capital and can increase it in the future inecessary.

Step 2:Getting DSC for the directors

Now all the company registration forms are online (filed on MCA portal) and to have it signed by the director, signature needs to be digital. Hence, every proposed director must have Digital Signature Certificate (DSC).

DSCs are issued by a certifying authority which has been licensed by the government. The procedure mostly consists of presenting yourself, proof of address as well as a photo and then a video based or OTP-based verification. After issuance, the DSC is employed for electronically signing incorporation forms, annual filing and other corporate documents.

Stage 3: Apply for Director Identification Numbers (DIN)

‘DIN’ of a Director Every Director who is an individual must have a separate director identification number. In case the new directors don’t already have a DIN, they can secure it through SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form at the time of incorporation.

Information like PAN, Aadhaar, address proof and other KYC details of the directors need to be provided for this. Once assigned, a DIN is valid for the entire duration of the director’s life and may be used with more than one company also.

This will enable the government to have a harmonised record of both people who are directors (in Indian companies) and also those who are disqualified.

Step 4: Select and Register a Business Name

Picking a powerful, brandable and legally compliant name is one of the important factors for registration. It should be one of a kind, not resembled same or close to the companies already in existence and should end with “Private Limited”.

Part A of the SPICe+ form on MCA portal is used to reserve the name. You can put forward one or more names if available. The ROC (Registrar of Companies) examination determines if same name or trademark are already in use, the new name is approved or rejected.

Step 5: Prepare the MOA and AOA of Your Company

What are MOA and AOA of Private Limited Company? Memorandum of Association (MOA): It outlines the objectives, extent of operations and powers of the company while Articles of Association (AOA) states about internal governance guidelines including management structure, rights and duties of directors and shareholders.

MOA (INC-33) and AOA (INC-34) are to be used for filling of incorporation in the SPICe+ application and are to be digitally signed by the subscribers, who shall be a chartered accountant, cost accountant or company secretary, in whole-time practice. These papers be the one to legally establish your company, so you will want to describe the principle objects on those in accordance of what your trade is and what end you wish to gain.

Step 6: Close the SPICe+ Form and Complete All Details of Incorporation

company incorporation,
name approval (if not completed earlier),
DIN allotment,
PAN and TAN of the company, and
EPFO, ESIC and bank acct in certain cases based on present integration.
Therein the particulars of directors, shareholders, authorised and paid-up capital, registered office address and list of share holding are entered and supporting documents in terms of identity and address proof is uploaded for Directors/Shareholders or other proofs/documents as may be specified attaching necessary fee.

All such forms are signed digitally by a director and practicing professional, if needed and uploaded to MCA portal with governance fees & stamp duty as applicable lies on state-wise capital amount.

7 – Verification by ROC and Certificate of Incorporation issuance

After submission of the SPICe+ form and attached documents, Registrar of Companies process the application. If there are any inconsistencies, or missing information, the ROC might ask for clarification and even a resubmission with corrections.

If all is in order, then the ROC will approve the incorporation and produce the Certificate of Incorporation (COI). This certificate is incorporated by reference as an exhibit to the Registration Statement of which this Prospectus forms a part. In general, PAN and TAN are also generated and dispatched to you along with the COI or shortly thereafter.

As of this date your Private Limited Company will exist in law from the original date of Incorporation as a distinct entity.

Step 8: Post-incorporation Compliance and First Board Meeting

Enrollment is just the first milestone. There are few compliances which need to be done immediately after the incorporation. The company would be required to open a bank account current in its own name, deposit the subscribed share capital and issue Share certificates in favor of shareholders etc.

The first meeting of the board must be within a certain time in order to appoint the first auditor, pass an initial expenses motion and accept notice of articles. Registered Office Address shall be confirmed and filed with ROC if the same was not such at incorporation.

Keeping good accounting ledgers, statutory registers and minutes from your company’s formation means you’re not chasing down information when funding or due diligence is just around the corner.

What This All Leads To: A Process That is Thoughtfully Structured to Give You a Strong Base

Registering a Private Limited Company in India could sound to be very complicated, but if you have someone to help you understand each and every step you needs to follow – everything will look like a feather falling behind.

For business owners who want to invest in growth and aspire to raise funds, or simply aiming for a long-term brand value, there are very good reasons why this may be a preferred option. For other entrepreneurs with an early stage startup – Read The Fantastic 16 and Start A New Business In India without any Investment: Unlimited Guide? However if you’re serious about funding and growing your company, go with a Private Limited Company. With the appropriate guidance and planning, you can finish incorporating with a minimal amount of fuss so you can get down to what really matters: actually growing your business.