FAQs on Private Limited Company registration in India

There are many questions that might be arising while you want to register your Private Limited Company. Here we have made a compilation of the Most Frequently Asked Questions on the Private Limited Company registration in India.

Q1) What is the meaning of a Private Limited Company?

A Private Limited Company is a small company that is handled by a group of people privately. The liability of the members of a Private Limited Company is limited to the number of shares respectively held by them. Shares of Private Limited Company cannot be publicly traded.

Q2) Is it possible for a small firm to register as a private limited company?

Yes, a small firm can register with the Indian government as a private limited company. It gives them credibility and a positive image of their company in the eyes of suppliers, future customers, and financial institutions. It assists the organization in obtaining loans with minimal compliance from banks or potential clients when going into contracts.

Q3) Which is better Limited Liability Partnership or Private Limited Company?

Private Limited Company is the simplest and a very popular form of Business Registration in India. It can be registered with a minimum of two people. Limited liability protection to shareholders, ability to raise equity funds, separate legal entity status make it the most recommended type of business entity for millions of small and medium-sized businesses that are family-owned or professionally managed.

When partners have limited liability at that time it is termed as  Limited Liability Partnership (LLP). LLP is basically a combination of both Company and Partnership. It is an alternative form of business registration in India that is generally preferred by Professionals, medium and small-scale businesses. Limited It is governed by LLP Act, 2008 and as per the LLP agreement formed at the time of Incorporation.

Q4) What is the procedure for Private Limited Company registration in India?

As far as the answer to the question “How to register a Pvt Ltd Company in India?” concerns, the process has been modified by the MCA. Earlier while to incorporate a Pvt Ltd Company, Form INC 32 i.e Form Spice was necessary, the MCA has recently replaced the earlier SPICe form with a new web form called SPICe+ (SPICe Plus). Hence, Incorporating a Private Limited Company is even easier now. Let us now understand the process of registering a Pvt Ltd Company in India through SPICe Plus (SPICe +):

With the introduction of SPICe plus, now you can Incorporate a Private Limited Company, with a Single application for Name reservation, Incorporation, DIN allotment, Mandatory issue of PAN, TAN, EPFO, ESIC, Profession Tax (Maharashtra), and Opening of Bank Account.

SPICe+ is divided into two parts as follows:

1. Part A: Name reservation for the company:

• Apply for name reservation of the company in Part A of the form Spice+.
• It can be used for taking name approval of the proposed Company and also for filing Company registration in one go.

2. Part B: In Part B of the Form Spice+, apply for the following services:

• Incorporation
• DIN allotment
• Mandatory issue of PAN
• Mandatory issue of TAN
• Mandatory issue of EPFO registration
• Mandatory issue of ESIC registration
• Mandatory issue of Profession Tax registration(Maharashtra)
• Mandatory Opening of Bank Account for the Company and
• Allotment of GSTIN (if so applied for)

The SPICe+ application form can be applied in two ways:

• Part A (Name Reservation) and Part B (All Other Services) can be applied for
  on a simultaneous basis.
• Part A can be applied for initially, and upon reservation of the name, Part B can be applied for.

That means, you may either choose to submit Part-A for reserving a name first and thereafter submit Part B for incorporation & other services or you can File Part A and B together at one go for incorporating a new company and availing the bouquet of services as above.

Q5) What are the documents required for the Private Limited Company Registration?

Following are the documents that is required at the time of Private Limited Company registration in India:

• Photograph of all the Directors
• PAN Card of all the Directors
• ID Proof of all the Directors (Driving License/Passport/Voter ID)
• Electricity Bill or any other utility bill for the address proof of the Registered Office

Q6) When should I file the Annual returns of my Pvt. Ltd. Co.?

Private Limited Companies are required to file their Annual Accounts and Returns disclosing details of its shareholders, directors, etc to the Registrar of Companies. Such compliances are required to be made once a year.

As a part of the Annual Filing, the following forms are to be filed with the ROC

• Form MGT-7 (Annual Return): Every Private Limited Company is required to file its Annual Return within 60 days of holding of Annual General Meeting. Annual Return will be for the period 1st April to 31st March.
• Form AOC-4 (Financial Statements): Every Private Limited Company is required to file its Balance Sheet along with a statement of Profit and Loss Account and Director Report in this form within 30 days of holding of Annual General Meeting.

Q7) What are the benefits of a Private Limited Company in India?

Amongst many following are few advantages of Private Limited company:

• There is a Limited risk to personal assets in Pvt.Ltd.Co.
• Pvt. Ltd. Co. is a Separate Legal Entity.
• In a Private Limited Company, there would be Limited Liability on members.
• Shares of a company limited by shares are transferable by a shareholder to any other person. The transfer is easy as compared to the transfer of an interest in a business run as a proprietary concern or a partnership
• Just as one person can bring a legal action in his/her own name against another in that person’s name, a company being an independent legal entity can sue and be sued in its own name.
• A company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved.
• For a private company, the earlier minimum number of the share capital was Rs. 1,00,000, but now there is no such minimum compulsion. Therefore there is no pressure on fund requirements.
• It’s easy to fetch funding in a private limited company by transferring shares.

Q8) What is the minimum turnover and capital required for Pvt.Ltd.Co. in India?

There exists no bar on turnover or capital in a private Limited Company, unlike One person Company.

Q9) Can one person start a Pvt. Ltd. Co. in India?

Minimum two directors are required to incorporate a private limited company. Companies Act, 2013, has introduced the concept of One Person Company (OPC) private limited, in which a single individual can start a private limited company. Thus, if you plan to incorporate OPC, you can incorporate it with only one director.

Q10) How much tax does a Private Limited Company Pay?

Private limited companies with a total turnover of less than 400 crores during the previous year are taxed at 30% of total income.

Private limited companies with a total turnover of more than 400 crores during the previous year are taxed at 25% of total income.

In addition to income tax, a private limited company is also liable to pay income tax surcharge, education cess, and secondary and higher education cess.

Q11) How can I close my Private Limited Company?

Closing a private limited company can be a painful procedure as the incorporation of this company structure. There are different kinds of methods that can be opted for closing down the private limited company. Here are some of the ways by which you can close down your Private Limited Company legally.

• Selling the Company- This is the common method wherein the owner of the company can sell all the shares of the company to any third person. With this, all of the rights and responsibilities of the company are transferred to the other person.
• Strike off the Company- Any defunct company who desires to get its name struck off from the registers of ministry can apply to the registrar in the form Fast Track Exit form. Also, the registrar can itself strike off the name of the defunct company if has reasonable reasons to believe that it is required. In the second situation, the opportunity of being heard must be provided to the company.
• Voluntary Winding Up-Voluntary winding occurs when the members of the company of the creditors decide among themselves to close down the company. Under this closing down the court, supervision is not there. But after the completion of winding up the relevant documents must be submitted with the court for obtaining the order of dissolution.

Q12) What are the minimum requirements to register a private limited company?

To register a Private Limited Company following are the minimum requirements:

1. There need to be minimum 2 members to act as shareholders
2. It needs to have a minimum of 2 directors
3. It requires no minimum share capital to register a Private Limited Company
4. From the above 2 directors at least one should be an Indian Resident.
5. The person should mandatory hold a PAN card
6. The person should carry a valid Id and Address proof in his own name.
7. He should have a registered office space in India.

Q13) Is registration necessary for Private Limited Companies in India?

Yes, Registration for a Private Limited Company is necessary as, without registration, there can be no existence of a company.

Q14) What are the terms and conditions to use Pvt Ltd with the name of any organization?

The only condition to use “Private Limited” as a suffix with any organization name is to have the organization incorporated/registered / or converted to a Private Limited Company.

The organization must be registered as a Private Limited company with ROC (Registrar of Company) in India.

It is mandatory for all the companies which are registered as a Private Limited Company, to use Privately Limited as a suffix at the end of the companies name.

Q15) What is the ROC compliance for a Private Limited Company?

Here are mandatory ROC compliance for a Private Limited Company:

1. Form ADT 1: First Auditor of the company shall be appointed by the BOD within 30 days of Incorporation who shall hold the office till the conclusion of 1st AGM.

2. Form MGT 7: Form MGT-7 must be filed by all companies registered in India every year. It is an electronic form provided by the Ministry of Affairs to all the corporations in order to fill in their annual return details. The due date for filing MGT-7 is within 60 days from the date of the Annual General Meeting.

3. Form AOC 4: Every Private Limited Company is required to file its Balance Sheet along with a statement of Profit and Loss Account and Director Report in this form within 30 days of holding of Annual General Meeting.

The above forms need to be certified by CA/CS/CWA.

Q16) Are annual filings required for fast track exit closure of a Private Ltd. Company, which failed to commence business?

No, Annual filings are not required for the fast track exit closure of a Private Limited Company which failed to commence business.

There are only two criteria which are as follows:

• The company applying under FTE should not have any assets and liability.
• The company should not have commenced any business activity or operation since incorporation or at least one year must have been passed since the last business activity or operation.

The Company desirous to get its name struck off from the Register shall file an application in the prescribed Form STK-2 online with the Registrar. The form shall be accompanied by an affidavit, an indemnity bond, a statement of account duly certified by a Chartered Accountant in practice or auditor of the company, and a copy of board resolution showing authorization for filing the form.

Q17) As per Indian law, How many maximum directors can a Private Limited Company have?

As per Indian law, The Indian companies Act, 2013 states that A Private Limited Company in India can have a minimum of 2 directors and a maximum of 15 directors.

However, The Company may appoint more than 15 directors, only after passing a special resolution.

Q18) Do Private Companies have to release annual reports?

It is mandatory for all the companies which are registered under MCA to file their annual reports with the concerned ROC every year. However, for Private Limited Companies, it is not mandatory to publish or release their annual report for Public access.

Q19) What is the government fee to appoint a new auditor in a Private Limited Company?

To appoint a new auditor in a Private Limited Company, an intimation of appointment shall be given to the Registrar of the Company (ROC). Which is to be filed in Form ADT 1, along with prescribed fees as follows:

Q20) A private limited company failed to hold AGM within the due date due to a natural disaster, what do I do?

If you have failed to hold an AGM (Annual General Meeting) within the due date due to a natural disaster, You may seek the remedy from the Registrar of Companies, as ROC may extend the timeline for holding of AGM for a maximum of three months if there is a genuine and special reason for not holding the AGM within the specified time.

As in your case you have a genuine reason for not holding AGM due to natural disaster, the ROC may extend the timeline.

For this, you need to file e-form: GNL-1 with concerned ROC with a Certified true copy of board resolution citing reason & period of extension required along with prescribed fees.

Q21) What are the document required to add a director in a Private LTD company?

To add a director to a Private Limited Company, all you need is three things:

• A valid Digital Signature Certificate(DSC)
• Director Identification Number
• A Consent letter from the proposed director.

Q22) is it mandatory to add a Private Limited after the company’s name ex. XYZ PVT LTD?

Yes, If your company is incorporated as a Private Limited Company, it is mandatory to add a Private Limited Company after the company’s name.

In case it is a Public Limited Company, the suffix you need to add is Limited (Ltd).

Q23) Is an audit mandatory for a startup Private Limited Company?

Be it a Startup or an established Private Limited company, It is mandatory compliance to have the company’s account audited.

Even the appointment of an auditor within 30 days of the incorporation is mandatory compliance for a Private limited company.

Q24) What are the minimum requirements to register a Private Limited Company?

To register a Private Limited Company, the following are the minimum requirements:

• 2 Directors, one of which has to be an Indian resident and an Indian Citizen.
• 2 shareholders who can be a natural person or a legal entity.
• There is no requirement of minimum share capital to start a company. A company can be registered even with 10,000/- Rupees.