Ltd Registration: Everything You Need to Know
The Ltd registration process allows you to form, register, and then operate as a private limited company.3 min read
2. Reasons to Register a Private Limited Company
3. Documents Required for Company Registration
4. Steps in Forming a Private Limited Company
The Ltd registration process allows you to form, register, and then operate as a private limited company. Before you form this type of business entity, you must first understand the core advantages and disadvantages — especially if you plan on having multiple shareholders involved. From limited liability to tax-efficient income, if you have been considering Ltd registration, here is what you need to know.
What Is a Private Limited Company?
A company is defined as a legal entity that is registered to conduct business and may be structured in a number of ways. As stated in its name, a private company is an entity that holds private ownership, remaining independent of its promoters. There are other forms in relation to company registration as well, which include:
- Partnership firm registration
- Proprietorship firm registration
- Limited liability partnership (LLP) registration
- One person company (OPC) registration
- NGO registration (Section 8 company registration)
As discussed, a private company is most often a small business that is privately held, limiting associated owner liability to company shareholders. There are also restrictions in regards to the number of shareholders (up to 200), who are unable to trade shares publicly. When registering as a private company, this process is governed by the Ministry of Corporate Affairs, Companies Act, 2013, as well as the Companies Incorporation Rules, 2014.
To complete the registration process, you must have at least two shareholders (with a maximum of 200), as well as two directors. One individual person may act as both a shareholder and director, whereas a corporate legal entity can only act as a shareholder.
Reasons to Register a Private Limited Company
There are a number of reasons why you may want to register a private limited company, including the following benefits:
- This entity is easy to register, manage, and run
- When the time comes, it is easy to dissolve
- Private limited companies offer flexibility (in terms of partnerships and investor shares)
- They are preferred by venture capitalists, investors, and banks
- They are considered to be a separate legal entity, reducing liability
Documents Required for Company Registration
In order to register your private limited company, you will need to include the following:
- Your identity + your address — For both of these, additional proof is required in relation to all shareholders and directors. Such supporting documents include valid paperwork only, such as bank statements or a utility bill (which is less than two months old).
- Register office proof — You must prove that you have a registered office. Once again, this may be verified using a utility bill, a rental agreement, or a sale deed, in addition to a letter from your landlord which state his/her consent for you to use the space as a registered office.
- Incorporation documents — These documents must be signed.
- Fees will also apply.
Steps in Forming a Private Limited Company
When forming a private limited company, please be mindful of the following steps.
- Obtain a DSC and DIN — Both a Digital Signature Certificate (DSC) and Director Identification Number (DIN) are required for the anticipated directors of the company. Since your DSC is completed online, a digital signature will be accepted. Please be aware that you must obtain either a class 2 or class 3 category DSC. There are three options to obtain your DIN, including via form DIN 3, via a SPICe form, or via ClearTax.
- Name approval — You must submit a minimum of one name to a maximum of six names to the MCA.
- Complete Form SPICe INC-32 — Subject to MCA processing times, the application for incorporation is typically approved within 5 to 7 days.
- File e-MoA (INC-33) and e-AOA (INC-34) — These electronic forms have been introduced to help support and simplify the registration process in India.
- Apply for PAN and TAN — This will require forms 49A and 49B respectively.
- Open a bank account under the name of the company — Also, you will be required to hold annual board meetings to file returns with MCA (Ministry of Corporate Affairs).
Before you officially register, you must consider a number of key factors. In addition, you must understand all of the required steps involved to ensure that you successfully form your private limited company based on its potential growth. If you require any additional assistance, it is highly recommended that you seek a professional opinion. In this case, a proactive approach is imperative.
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