Pvt. Ltd. company enjoys wide options to raise funds through bank loans, Angel Investors, Venture Capitalists, in comparison to LLPs and OPCs.

Due to the limited liability nature of a Private limited company, Investors are more willing to provide funds to this structure of business than any other form of business as the rights of all investors are clearly defined under the law

A Private Limited Company (PLC) is one of the most common types of legal entityin India. Private Limited Companies are governed by the Companies Act, 2013 and require a minimum of 2 Directors and 2 Shareholders with one of the Directors being an Indian Resident and Indian Citizen.

To register a company in India, the following are minimum requirements:

• 2 Directors – 1 Person should be an Indian National and Indian Resident

• 2 Shareholders – The Directors can be shareholders

• Registered Office in India

100% Foreign Direct Ownership (FDI) is permitted in most sectors in India and there is no restriction on foreign shareholding of a private limited company. Hence, most foreign subsidiaries are established in India as private limited company.

Once a company is registered in India, various compliance must be maintained from time to time to avoid penalties and prosecution. The following are some of the compliance a company would be required to complete after company registration:

Auditor Appointment: 

All companies registered in India must appoint a practicing and licensed Chartered Accountant registered with the ICAI within 30 days of incorporation.

Director DIN KYC: 

All persons who hold a Director Identification Number (DIN) – which is allocated during the incorporation process must complete DIN KYC each year to validate the phone and email address on record with the Ministry of Corporate Affairs.

Commencement of Business:

 Within 180 days of incorporation, the company must open a Bank Current Account and the shareholders must deposit the subscription amount mentioned in the MOA of the company. Hence, if the company was to be incorporated with a paid-up capital of Rs. 1 lakh, then the shareholders must deposit Rs. 1 lakh in the Company’s bank account and file the bank statement with the MCA to obtain a commencement of business certificate.

MCA Annual Filings:

 All companies registered in India must file a copy of the financial statements with the Ministry of Corporate Affairs each financial year. If a company is incorporated between January – March, the company can choose to file the first MCA annual return as a part of the next financial year’s annual filing. MCA annual return consists of Form MGT-7 and Form AOC-4. Both these forms must be digitally signed by the Directors and a practicing professional.

Income Tax Filing:  

All companies must file an income tax return using Form ITR-6 each financial year. Income tax filing must be done for each financial year before the due date – irrespective of the incorporation date. The income tax return of a company must be digitally signed using one of the Director’s digital signature.

All companies registered in India are required to maintain a registered office in India. The registered office must have a board with the name of the company and should be a place where notice or communication if any can be served. Hence, the registered office of a company cannot be vacant land or under construction premises.

After incorporation, the registered office of a company can be changed if required. In case the registered office is changed within the same city or same Registrar of Company, the process can be completed easily. In case the registered office of a company is changed from one state to another, the process would be longer and more cumbersome.

During the company registration process, the Directors can opt to obtain GST registration along with the incorporation. However, it is not mandatory for a company to be registered under the GST unless certain turnover limits are crossed. You can know more about the turnover limit and process for obtaining GST registration in our detailed guide on GST registration in India.

After company registration, a bank current account must be opened in the name of the company within 180 days and the subscription amount must be deposited. If the above steps are not completed, the commencement of business certificate would not be issued and a penalty would be applicable.

The following are documents required to open a bank account for a private limited company:

• Incorporation Certificate of Company

• Directors KYC Documents

• Board Resolution Authorizing the Directors to open Bank Account

• Address Proof of the Company

We work with various banks to help our clients open a current accounts for their companies in a seamless fashion.

The following are the major advantages of incorporating a private limited company in India versus other entity types.

Separate Legal Entity

A company is both a legal entity and a juristic person. Therefore, a company has broad legal rights to like acquiring property, incurring debts, hiring people, etc. As a company is a separate legal entity, the company's members (shareholders or directors) are not personally liable for the company's liability.

Limited Liability

A private limited company is a separate legal entity with limited liability provisions. Therefore, the shareholders are not liable for the losses of the company – for an amount more than what was invested by them into the company as share capital.

Uninterrupted Existence

A company has 'perpetual succession,' which means it will continue to exist until it is legally dissolved. Because a company is a separate legal entity, it is unaffected by the death or other departure of its members, and it continues to exist regardless of membership changes.

Fund Raising

A private limited company has multiple options for fundraising. A company can raise funds from shareholders, investors, angels, venture capital funds, private equity funds, foreign funds, NBFCs, banks and other financial institutions. Only a company can raise debt and equity funds from investors.