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Understanding the Private Limited Company Registration
The Indian government requires every business to be legally registered. Entrepreneurs or business owners must choose the ideal business structure when they register their businesses. Some may register their business as a partnership, while others register it as a private limited company.
Registering a business as a private limited company has its own benefits and provides flexibility in operations. However, it is important to know the registration process before registering a business as a private limited company. This blog will help you understand the private limited company registration process.
What is a private limited company
A private limited company is a type of business entity owned privately by limited owners. In India, a private limited company can have a maximum of 200 shareholders. These shareholders are required to hold all the company shares privately and can not trade them publicly. One of the best benefits of a private limited company is limited liability, which protects the shareholders' personal assets in case of insolvency.
What are the different forms of company registration
Here are some forms of common company registrations a business owner can choose from:
- Partnership Firm Registration
- Private Limited Company (PLC)
- Proprietorship Firm Registration
- Limited Liability Partnership (LLP) Registration
- One Person Company (OPC) Registration
- NGO Registration ( Section 8 Company Registration )
How to register a private limited company
Here are the steps you should take to register a private limited company:
Obtain Digital Signature
Digital signatures are mandatory to register a private limited company. The form requires a digital signature since the registration process is completely online (offered by private and government online marketplaces and platforms). Digital signatures are mandatory for all the witnesses and subscribers under the Articles of Association (AOA) and Memorandum of Association (MOA). You can obtain a Digital Signature from authorities recognized by the Indian government. Here, you must obtain the class 3 category of the DSC.
Apply for DIN
Every private limited company must have a set number of directors. A Director Identification Number (DIN) identifies a director. A director can either file form DIR 3 or get a DIN issued by filing SPICe+. DIR 3 requires the director to fill in the basic information such as PAN and Aadhaar card details. However, under the SPICe+ process, three directors can apply for DIN. If the company wants to appoint more than three directors, it has to appoint them later after the company's registration.
Name approval
Once the company directors are issued their DINs, the company needs to reserve its name. The company name can be reserved through Part-A of SPICe+ under its ‘name registration’ facility. Alternatively, the company can reserve its name by filing Part-A and Part-B of the SPICe+ form together. However, it is important to remember that only one name can be applied while filing both forms together.
Form SPICe+ (INC-32)
The Ministry of Corporate Affairs has introduced Form SPICe+ from 23 February 2020 to register new companies. Part B of the SPICe+ form is fully digital and allows an easy registration process. Once the name is approved, the applicant is required to click on the approved name’s link and complete the company registration.
PAN and TAN
When filing SPICEe+, you can also apply for the company’s PAN and TAN. Once the registration process is complete, the online system will automatically generate these forms. Along with the Certificate of Incorporation of the company, the Income Tax Department also allots the PAN. You will receive an email from the Ministry of Corporate Affairs containing the company’s Certificate of Incorporation, PAN, and TAN.
Conclusion
It is mandatory to register a company under Indian laws to carry out the business legally. Earlier, the Ministry of Corporate Affairs required private limited companies to be registered by filing the Memorandum of Association and Articles of Association. However, with the introduction of SPICe+, all the forms are now linked within the SPICe+ system, allowing for easy registration of a private limited company. Once you have set up the company, you can easily take loans from major banks and NBFCs to start the business operations.
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