Garima Agrawal
Incorporation of a Private Company: Step-by-Step Guide
Did you know over 80% of India’s companies are private limited? The Ministry of Corporate Affairs (MCA) has made setting up a private limited company easier. This guide will help you through the steps to incorporate a private company under the Companies Act 2013. It covers everything from getting pre-registration documents to filing the forms.
If you’re starting or running a business, knowing how to incorporate a private company is crucial. This guide will help you with legal steps and online filing. It gives you the knowledge to successfully set up your private limited company in India.
Incorporate your Private Limited Company at Just ₹ 6999/-
Key Takeaways
- Private limited companies are the most popular in India, following the Companies Act 2013.
- To start, you need pre-registration documents like Digital Signature Certificates (DSC) and Director Identification Numbers (DIN).
- The SPICe+ form (INC-32) does it all: names your company, incorporates it, gives out DIN, PAN, and TAN.
- Creating the Memorandum of Association (MoA) and Articles of Association (AoA) is key.
- After checking your documents, the Registrar of Companies (RoC) gives you the Certificate of Incorporation.
What is a Private Limited Company?
A private limited company is a business type in India where shares aren’t traded publicly. It has many benefits, like limited liability and being a legal entity.
Limited Liability and Legal Entity Status
One big plus of a private limited company in India is limited liability. This means the personal stuff of the shareholders is safe. They’re only on the hook for what they put into the company. Also, this type of company is seen as its own legal being, separate from its owners or directors.
Advantages of a Private Limited Company
Here are some benefits of having a private limited company in India:
- Flexible ownership with 2 to 200 shareholders
- Can get money from private investors or loans
- Keeps going even if the owners change
- Looks more professional and credible
- Gets tax breaks and other financial perks
| Requirement | Details |
|---|---|
| Minimum Number of Shareholders | 2 |
| Maximum Number of Shareholders | 200 |
| Minimum Paid-up Capital | ₹1 lakh |
| Minimum Number of Directors | 2 |
| Maximum Number of Directors | 15 |
In summary, a private limited company in India has a strong legal setup, is financially flexible, and offers many benefits. This makes it a top choice for entrepreneurs and businesses.
Prerequisites for Incorporating a Private Company
Before you start, there are a few things you must do to incorporate your private limited company. You need to get digital signature certificates and apply for a director identification number. These steps are key to registering your company.
Obtaining Digital Signature Certificates
To start, all directors and subscribers of the MoA and AoA must have valid digital signature certificates (DSC). These are like digital versions of your signature. They make sure your company documents are genuine during the setup process.
Applying for Director Identification Number
Getting a Director Identification Number (DIN) is also a must. The Ministry of Corporate Affairs (MCA) gives out this unique number. It lets directors officially represent the company. You can get a DIN when you file the SPICe+ form during registration.
Meeting these prerequisites for company incorporation helps you set up your private limited company. It also brings you the perks of having this legal structure.
| Prerequisite | Description | Importance |
|---|---|---|
| Digital Signature Certificate (DSC) | An electronic signature used to authenticate and secure digital documents | Required for all proposed directors and subscribers of the MoA and AoA during company registration |
| Director Identification Number (DIN) | A unique identification number issued by the MCA for all company directors | Enables directors to act in their official capacity on behalf of the company |
Procedure for Incorporation of a Private Company
The procedure for incorporating a private limited in India has several key steps. These steps make sure the company registration goes smoothly. Let’s look at the main stages of this process:
- Obtain a Digital Signature Certificate (DSC): This document proves the identity of the company’s directors. It lets them sign important documents online.
- Apply for a Director Identification Number (DIN): All directors of the company need a DIN. It’s a unique number given by the Ministry of Corporate Affairs.
- Reserve the Company Name: The company’s name must get approval from the Registrar of Companies. This is done through the SPICe+ Part A form. It checks if the name is unique and can be registered.
- Prepare Statutory Documents: The company must have the Memorandum of Association (MoA) and Articles of Association (AoA). These documents need to be made and finalized online to make the process smoother.
- File the SPICe+ Form (INC-32): This form combines many filings needed for incorporation. It makes the procedure for incorporation of private company easier.
- Obtain the Certificate of Incorporation: After approval, the company gets its Certificate of Incorporation. This officially marks its legal start.
The whole company registration process usually takes 2 to 4 weeks. After that, there are more forms and certificates needed to keep the company legal.
The process of setting up a private limited company in India is made to be easy and efficient. It helps businesses start legally with little trouble. By knowing and following these steps, new entrepreneurs can easily set up their company. This way, they can turn their business dreams into reality.
Step 1: Company Name Approval
The first step in starting a private company in India is getting your company name approved. This involves two main parts:
Name Reservation via SPICe+ Form
To save your company name, you must fill out the SPICe+ (INC-32) form. This lets you suggest up to two names for your private limited company. The government asks for ₹1,000 to reserve the name.
Name Approval with Incorporation Application
After reserving your company name, you must apply for final approval with your incorporation application. The Registrar of Companies (ROC) will check the name and approve it. This approval lasts for 20 days. You must finish registering your company during this time.
Choosing a unique and fitting name is crucial. It should match your business and follow the Ministry of Corporate Affairs (MCA) rules. Make sure to avoid using words that are off-limits or not suitable for your company name.
| Statistic | Value |
|---|---|
| Private Limited Companies in India | Minimum 2 shareholders, Maximum 200 shareholders |
| One Person Company | 1 shareholder, Indian citizen above 18 years |
| Small Company in India | Capital investment ≤ ₹4 crores, Turnover ≤ ₹40 crores |
| Company Name Reservation Fee | ₹1,000 |
| Name Approval Validity | 20 days |
Step 2: Preparing Statutory Documents
After getting your company name approved, the next step is to prepare the statutory documents. These include the memorandum of association (MoA) and the articles of association (AoA). They are key documents for your private limited company.
Memorandum of Association (MoA)
The memorandum of association outlines the company’s goals, what it can do, and the rights of shareholders. It sets the company’s purpose and what activities it can take part in. This document makes sure the company stays within legal limits and its original goals.
Articles of Association (AoA)
The articles of association are rules that guide the company’s management. They talk about things like share issuance, shareholder meetings, director roles, and daily operations. The AoA helps the company run smoothly on a daily basis.
The MoA and AoA together are vital for starting your private limited company. They must be written carefully to follow the Companies Act, 2013 and other laws.
Getting these documents ready can be hard and takes a lot of time. Getting help from experts can make the company registration process easier and faster.
Step 3: Filing SPICe+ Form (INC-32)
The SPICe+ form (INC-32) is key to starting a company in India. It lets you do several tasks at once, like reserving a name, forming the company, and getting important IDs.
Some key highlights of the SPICe+ form (INC-32) include:
- It replaces the old SPICe form, offering about 10 services from various government departments and ministries.
- Services you can get through SPICe+ include name reserving, company forming, getting a Director Identification Number (DIN), Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), Goods and Services Tax Identification Number (GSTIN), Employees’ Provident Fund Organisation (EPFO), and Employees’ State Insurance Corporation (ESIC) registration, as well as opening a bank account.
- The new AGILE-PRO form (INC-35) has taken over from the old AGILE form, and it covers registration for GSTIN, EPFO, and ESIC.
- You must attach certain documents with the SPICe+ form, like the Memorandum of Association (MoA), Articles of Association (AoA), proof of office address, utility bills, a resolution by the promoter company, and proof of identity and address for subscribers and directors.
- Companies started through SPICe+ with an Authorized Capital up to INR 15,00,000 get a ‘Zero Filing Fee’ discount.
The SPICe+ process has made starting a company in India faster, taking just days to complete. This is much quicker than the old process, which could take months.
| Service | Details |
|---|---|
| Name Reservation | The RUN Web Service is used for reserving names for new or existing companies. |
| Company Incorporation | SPICe+ (INC-32) form is used to incorporate the company. |
| Registrations | SPICe+ allows for application of DIN, PAN, TAN, GSTIN, EPFO, and ESIC registration. |
| Bank Account Opening | Companies started through SPICe+ must apply for a company bank account through the AGILE-PRO linked web form. |
Using the SPICe+ form (INC-32), entrepreneurs can make starting a company easier and more efficient.
Step 4: Obtaining Certificate of Incorporation
The final step in forming a private company in India is getting the Certificate of Incorporation. This document, given by the Registrar of Companies (RoC), makes your company a legal entity. It finishes the process of incorporation.
After filing the SPICe+ form and other documents, the RoC checks your application. It usually takes about 14 days to approve the name. Then, the Certificate of Incorporation is issued in 3-5 business days.
The Certificate of Incorporation has important info like the company’s name, address, and when it was formed. It proves your company is legal. It’s key for things like opening a corporate bank account, getting licenses, and building trust with clients and partners.
Remember, the Certificate of Incorporation can change over time. You might want to update the company name, address, or directors. You can do this by following legal steps and getting the RoC’s approval. They’ll then give you a new Certificate of Incorporation with the changes.
“The Certificate of Incorporation is the foundation upon which a company’s legal existence is built. It’s a critical document that provides legitimacy and opens doors for your business.”
In summary, getting the certificate of incorporation, company registration, and company formation is key to starting a private limited company in India. With this certificate, you can confidently start your business. You’ll know your company is officially recognized and has legal rights and benefits.
Post-Incorporation Compliances
After getting the Certificate of Incorporation, a company must follow several rules. These include registering for taxes, getting business licenses, and meeting filing and documentation needs.
Registering for Taxes and Licenses
One important step is tax registration. Companies need a Goods and Services Tax Identification Number (GSTIN) for GST. They also need a Permanent Account Number (PAN) for income tax and a Tax Deduction and Collection Account Number (TAN) for taxes.
Some businesses need special licenses and permits too. These include trade licenses, industry-specific registrations, and environmental clearances. These must be gotten from the right authorities on time.
| Compliance | Deadline |
|---|---|
| Obtain GSTIN | Within 30 days of incorporation |
| Apply for PAN and TAN | Within 30 days of incorporation |
| Acquire necessary business licenses | Varies based on the nature of the business |
It’s key to finish these post-incorporation tasks on time. This helps the company run smoothly and avoids penalties or legal trouble.
“Navigating post-incorporation compliances can be a daunting task, but it’s essential for the long-term success and legal standing of your business.”
Types of Companies in India
India has many business types for entrepreneurs to choose from, including private limited companies. You can also look into partnership firms, Limited Liability Partnerships (LLPs), sole proprietorships, one person companies, and Section 8 non-profits. Each type has its own rules, tax rules, and benefits.
Partnership firms need at least two partners and a partnership deed. LLPs protect partners by limiting their risk to what they’ve agreed to contribute. They also need an LLP deed and certain documents like PAN and Aadhaar cards for registration. One Person Companies are great for those who want full control, needing only one director.
Section 8 Companies focus on charity and need two shareholders and directors. Public Limited Companies are for those looking to grow big. They require three directors, seven shareholders, and a certain amount of paid-up capital as per the Companies Act 2013.
The cost and time to register these companies vary. For example, a Private Limited Company costs ₹14,999 and takes about 15 days to register. An LLP costs ₹12,999 and also takes around 15 days.
It’s important for entrepreneurs to understand the differences between these types of companies in India. This helps them choose the best structure for their business.
“Choosing the right business structure is a critical decision that can significantly impact a company’s growth and success.”
Advantages of Incorporating a Company
Incorporating a private limited company in India has many benefits for entrepreneurs and businesses. It protects personal assets and offers tax advantages. These make it a strong choice for many.
A key advantage is limited liability protection. This keeps the personal assets of shareholders safe from the company’s debts. Private limited companies are seen as separate legal entities. They can own assets, make contracts, and take legal steps on their own.
Another big plus is the easy transferability of shares. This makes it easier to pass on ownership and bring in new investors. It’s important for startups and growing companies. Private limited companies in India also get various tax benefits. They pay lower corporate taxes, get deductions on some costs, and can get government incentives and subsidies.
Investors and financial groups like private limited companies for their stringent regulatory framework. They also like the clear line between personal and business assets. This is great for startups wanting to grow big and get the capital they need.
Private limited companies in India don’t have to follow many legal rules under the Companies Act 2013. This makes running a business easier and lets companies focus on what they do best. You only need two shareholders to start one, making it easier to set up.
In summary, there are many good reasons to incorporate a private limited company in India. It offers protection, legal status, tax benefits, and more credibility. These reasons make it a great choice for entrepreneurs and businesses looking to succeed in India.
Common Mistakes to Avoid During Incorporation
Incorporating a business can be complex, even for experienced entrepreneurs. It’s key for business owners to know the most common mistakes. Avoiding these mistakes helps ensure a smooth start for your company.
One big mistake is not securing the company name early. This can cause delays and problems later. Also, forgetting to get digital signature certificates for directors can slow things down.
- Failing to reserve the preferred company name
- Neglecting to obtain digital signature certificates for directors
- Incomplete or inaccurate preparation of statutory documents like Memorandum of Association and Articles of Association
- Errors in filing the comprehensive SPICe+ form (INC-32)
- Lack of compliance with post-incorporation requirements, such as registering for taxes and licenses
Another mistake is submitting wrong or incomplete documents, like the Memorandum of Association (MoA) and Articles of Association (AoA). These documents are crucial for a smooth start.
Also, errors in the SPICe+ form (INC-32) can cause problems. This form is key for starting a company. Giving wrong info or missing details can lead to delays or even rejection.
| Mistake | Impact | Solution |
|---|---|---|
| Failing to reserve the preferred company name | Delays in the incorporation process and potential name conflicts | Thoroughly research and reserve the desired company name well in advance |
| Neglecting to obtain digital signature certificates for directors | Inability to complete the incorporation application and delays | Ensure all directors have valid digital signature certificates before initiating the incorporation process |
| Incomplete or inaccurate preparation of statutory documents | Rejection of incorporation application by the Registrar of Companies | Carefully review and proofread all statutory documents before submission |
Knowing about common mistakes in company incorporation, company registration errors, and incorporation pitfalls helps entrepreneurs. It makes the process easier and more confident, leading to a successful business start.
Conclusion
Starting a private limited company in India is now easier, thanks to the Ministry of Corporate Affairs. This guide helps entrepreneurs through the company incorporation process. It sets up a strong legal base for their business.
The process includes important steps and legal needs. The Memorandum of Association (MoA) and Articles of Association (AoA) are key. The Companies Act, 2013, explains how to register a company. It covers the legal documents and steps from promotion to starting business.
If you’re starting a new business or changing an old one, knowing how to register a private limited company in India is key. It ensures you follow the law and sets your company up for growth. By understanding the steps, you can confidently set up your business in the Indian market.
