Incorporation Benefits of Private Limited Company in India

A private limited company is an organisation that has a minimum of two shareholders, and a maximum of two hundred, with a minimum of two directors. A private limited company with one shareholder can invite friends or family members to join the organisation as the second shareholder. In addition, a private limited company also has limited liability; where a shareholder’s liability extends to the amount invested by him/her in the shares of the company.

Apply for Private Limited Company Registration

Benefits of Private Limited Company Registration

1. Separate Legal Entity: An entity means something which has a real existence; a thing with distinct existence. A company is a legal entity and a juristic person established under the Act. A juristic person is a person who is not a natural person or human being. Therefore a company form of organization has wide legal capacity and can own property and also incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts. Hence, a pvt ltd company is a legal entity separate from that of its members.
2. Uninterrupted existence: A company has ‘perpetual succession’, that is continued or 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 but continues to be in existence irrespective of the changes in membership. Perpetual succession is one of the most important characteristics of a company.
3. Limited Liability: Limited Liability means the status of being legally responsible only to a limited amount for debts of a company. Unlike proprietorships and partnerships, in a limited liability company the liability of the members in respect of the company’s debts is limited. In other words, the liability of the members of a company is limited only to the extent of the face value of shares taken up by them. Therefore, where a company is limited by shares, the liability of the members on a winding-up is limited to the amount unpaid on their shares.
4. Free & Easy transferability of shares: Shares of a company limited by shares are transferable by a shareholder t any other person. The transfer is easy as compared to the transfer of interest in business run as a proprietary concern or a partnership. Filing and signing a share transfer form and handing over the buyer of the shares along with share certificate can easily transfer shares.
5. Owning Property: A company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No shareholder can make any claim upon the property of the company so long as the company is a going concern. The shareholders are not the owners of the company’s property. The company itself is the true owner.
6. Capacity to sue and be sued: To sue means to institute legal proceedings against or to bring a suit in a court of law. Just as one person can bring a legal action in his/her own name against another in that person’s name, a company being an independent legal entity can sue and also be sued in its own name.
7. Dual Relationship: In the company form of organisation it is possible for a company to make a valid and effective contract with any of tis members. It is also possible for a person to be in control of a company and at the same time be in its employment. Thus, a person can at the same time be a shareholder, creditor, director and also an employee of the company.
8. Borrowing Capacity: A company enjoys better avenues for borrowing of funds. It can issue debentures, secured as well as unsecured and can also accept deposits from the public, etc. Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.

Process fo Private Limited Company Registration

Our Recommendation: Private Limited Company Incorporation Procedure

​Essential Requirements for Private Limited Company Registration

• Minimum 2 members required and Maximum 200 members
• Minimum Paid-up capital required is Rs 1 lakh
• Minimum 2 directors required and a maximum of 15 directors
• DSC (Digital Signature Certificate) is required
• DIN (Director Identification Number) is required in favour of the one main director

​Documents required for registering a private company

These documents pertain to proof of;

1. Identity: For proof of identity, respective shareholders will have to submit copies of their PAN cards and passports (especially for NRIs or foreign nationals) at the time of registration.
2. Address: For proof of address, respective shareholders are required to submit government-issued IDs, such as a driving license, voter’s id or a passport.
3. Residence: For residence proof, respective shareholders are required to submit the latest bank statements, electricity/gas/telephone bills.

Additional documents
Apart from documents that verify identity, there are;

1. Passport-size photographs
2. Specimen signature on a blank document (for company directors)
3. Memorandum of association that explains all the basic information about the company to register it.
4. Articles of associations that explains that rules, responsibilities, and objective of the company
5. Registration fee and stamp duty, to finally register with the State Government (where the company is located) as an operational and fully functional business entity.The certificate of incorporation is issued from the respective State Government. The certificate of incorporation is used to apply for company PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number).

Also, read: ​9 Reasons to Form a Private Limited Company