Private Limited Company

Introduction: A Private Limited Company is a type of business structure registered to give a separate legal existence to the business apart from its directors and shareholders. This means that a company continues to exist even after the death of any member. A private company in India can consist of a maximum of 200 members at a time. In a Private Limited Company, the shareholders are considered to be the owners of the company and the directors are responsible for the everyday operations of the business. This ensures that the personal assets of the shareholders and directors are separate from that of the company. Shareholders are responsible for the debts of the company only to the extent of the nominal value of their shares.

Private Limited Company registration is regulated by the Companies Act, 2013 and the Ministry of Corporate Affairs acts as the regulatory body for registration. To register a Private Limited Company in India, there must be at least 2 directors and 2 shareholders. The most important feature of a Private Limited Company is that it is the most favored form of business structure by investors as it limits the liability of the investors only to the investment they have made in the company.

Minimum Requirement for Private Limited Company:

  • A minimum number of two Directors who are adults.
  • One of the Directors of a private limited company has to be an Indian Citizen and Indian Resident.
  • The other director(s) can be a Foreign National.
  • It is also required to have two shareholders of a company.
  • The shareholders can be natural persons or an artificial legal entity.

Advantages of a Private Limited Company includes:

  • Separate Legal Entity
  • Uninterrupted existence
  • Limited Liability
  • Free & Easy transfer-ability of shares
  • Owning Property
  • Capacity to sue and be sued
  • Dual Relationship
  • Borrowing Capacity

Disadvantages of a Private Limited Company includes:

  • Registration Process
  • Compliance Formalities
  • Division of Ownership
  • Personal Liability
  • Winding Up of Company

Process to create a Private Limited Company:

  1. Obtaining Director Identification Number (DIN) & Digital Signature
  2. Applying for the name
  3. Filing for Incorporation of Private Limited Company
  4. Subscribing to the Private Limited Company
  5. Certificate of Incorporation
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