In India, a Private Limited Company stands out as a popular business structure regulated by the Companies Act, 2013. Entrepreneurs aiming to establish a company in India find it crucial to undergo Private Limited Company Registration. This not only fosters the development of a strong business framework but also offers directors the advantage of limited liability. To register a Company under the Companies Act, 2013, it needs to be registered with the ROC (Registrar of Companies) as per the guidelines & norms laid down by the MCA.

Different types of Business Structures in India?

Let’s discuss the different types of business structures in India, following is the list of same:

1. Private Limited Company: This Company is the most prevalent & popular type of corporate legal entity in India. Private Limited Company is a privately held business entity and Company is privately held by the shareholders & the maximum number of shareholders shouldn’t be more than 200. Similarly, the liability arrangement in a Private Company is that of a Limited Partnership, wherein the shareholder’s liability extends only up to the number of shares held by them. Usually, a Private Company in India doesn’t offer or trade its shares to the general public on the stock exchanges, but rather the private stock of the Company is traded or owned.
2. Public Limited Company: This Company is a group of members that is incorporated under the Companies Act and it has a separate legal existence & the liability of its members is limited to the share they hold.
3. OPC or One Person Company: A One Person Company is a company established by only one person. A single person established & managed the Company. A Person Company has all the features of a Company like limited liability, perpetual succession & a separate legal entity.
4. LLP or Limited Liability Partnership: A Limited Liability Partnership is an alternative corporate business that gives the benefits of limited liability of a Company & the flexibility of a Partnership. It is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the Limited Liability Partnership.
5. Sole Proprietorship: This is a business that is completely owned & controlled by a single person, a Company, or a Limited Liability Partnership. There are no partners in the business. Sole Proprietorship is not a separate legal entity from the business owner. The business owner has unlimited liability which means the owner is personally liable for all the debts & losses of the Sole Proprietorship.

Why is it necessary to choose the right business structure in India?

In India, choosing the right business structure is a vital part of running a business. Whether you are just commencing your business or your business is growing, it is vital to understand the options. Your legal structure of a business determines your tax rates, management & paperwork requirements, fundraising abilities & more. Partnerships & Sole Proprietorships are comparatively easy to commence, but they lack liability protection.

It is vital to choose your business structure very carefully as your ITR will depend on it. While incorporating your company or entity, remember that each business structure has different levels of compliance that need to be fulfilled. For instance, a sole proprietor has to file only an ITR. However, a Company has to file an income tax return and annual returns with the ROCs.

Books of Accounts of a Company should be mandatorily audited every year. Abiding by this legal compliance requires spending more money on auditors, tax filing experts & accountants. Hence, it is vital to select the correct business structure when thinking of Private Limited Company Registration. An entrepreneur must have a clear understanding of legal compliances he or she is willing to deal with.

Benefits of Private Limited Company Registration in India

The following are the benefits of Private Limited Company Registration in India:

1. Separate Legal Existence: The Company enjoys a separate legal existence from the owners and it can enter into its assets, and contracts & sue the 3rd parties in its name. As a separate entity, it has a perpetual existence even beyond the members’ lifetime.
2. Ease in Raising Funds: Being a highly compliant structure, banks prefer to issue loans easily to Companies. Private Limited Company offers key benefits like the ease in limited liability protection for owners & ownership transfer.
3. Limited Liability: By incorporating as a Private Limited Company in India, owners can limit their liabilities to their capital contribution commitment. Their assets are safeguarded from any big loss or debt in the business, unlike Proprietorship Firms & Partnership.
4. Easy Transferable: One of the main benefits of Private Limited Company Registration is the share can be easily transferred to the other person without any complications & hassle.
5. ESOP (Employee Stock Option Plans): A private Company can issue Employee Stock Option Plans to its employees subject to the limitation of the number of shareholders. Section 61 of the Companies Act enables a Private Company to issue Employee Stock Option Plans to its employees.

Checklist for Private Limited Company Registration in India

Following is the important checklist for Private Limited Company Registration in India:

1. A minimum of 2 Directors are required;
2. A minimum of 2 Shareholders and a maximum of 200 Shareholders are required;
3. DSC or Digital Signature Certificate for all the designated Directors;
4. DIN or Director Identification Number of all the Directors of the Company;
5. At least 1 Director must be an Indian Resident;
6. Company’s Name which is not similar to any other existing Company name;
7. Authorized Capital of a Private Limited Company;
8. MoA (Memorandum of Association) & AOA (Articles of Association);
9. Proof of registered office.

Documents Required for Private Limited Company Registration in India

Following is the list of all the vital documents required for Private Limited Company Registration in India:

List of documents related to the designated Director of the Company:

1. Aadhar and PAN Card of the Directors;
2. Latest passport-sized photos of all the proposed Directors;
3. Identity proof of the Directors;
4. Address proof of the Directors.

List of documents related to the Company:

1. Proof of registered office of the Company. The following documents must be submitted as address proof of the Company:

• Rental Agreement or Tenancy Agreement between the landlord and Company;
• Letter/NOC from the Landlord of their permission to use the premise or office as the company’s registered office;
• Sale Deed of the Company premise in the Company’s Name;
• MoA & AoA of the Company.

Conclusion: RegisterKaro offers a cost-effective service to facilitate the Private Limited Company Registration process, managing legal formalities and ensuring adherence to MCA regulations. Upon successful registration, you receive a Certificate of Incorporation, along with PAN and TAN documents, enabling you to smoothly initiate business operations after setting up a current bank account.