How Do I Legally Start a Private Limited Company in India?

The concept of business ownership has changed from a far-fetched dream to a practical reality for Indians. Due to efforts like Startup India and Digital India by the government, entrepreneurship has never reached heights better than today. Among all business structures, a Private Limited Company stands above all due to its existence in eyes of law, limitation of liability of its members, and ease to gather funds expeditiously by rallying investors.

Forming a company of this nature, however, is not just about registering a name. It requires clear planning, conformity to regulatory instructions, and systemic execution. Let us see, step by step, the process of legally forming a Private Limited Company in India.

Why Choose a Private Limited Company?

Before venturing into technicalities, one should have some notion regarding why a Private Limited Company (Pvt Ltd) is more emphasized:

• Limited Liability: It safeguards the individual assets of shareholders.

• Separate Legal Identity: It possesses a separate identity in law.

• Increasing Costs: Preferred by venture capitalists and angel investors.

• Continuity: It continues to exist irrespective of changes in shareholders or directors.

• Credibility: Registered organizations are more credible to clients, suppliers, and financiers.

Legal Procedure to Start a Private Limited Company

If you’re thinking about starting a company, here’s the lowdown based on the Companies Act from 2013. You’ll need to check off a few basic eligibility criteria:

• You need at least two shareholders.

• Two directors, but at least one of them has to be a resident of India.

• You have to register your office address.

• Unique company name.

• And capital contribution.

Digital Signature Certificate (DSC)

As for the documents you’ll need, here’s the list:

• A PAN Card

• An Aadhaar Card

• A passport-size photo

• Your email ID and mobile number

Director Identification Number (DIN)

Every proposed director of a company has to come up with a Director Identification Number (DIN). This can be filed through the SPICe+ form (as will be discussed later).

DIN is a number provided by the Ministry of Corporate Affairs (MCA), which is valid for a lifetime.

Name Approval

•  Naming is important; it should be unique and appropriate. It should not be the same or resemble in any means, to any known company/ LLP / trademark.

• Make application through the RUN (Reserve Unique Name) service on the MCA site.

• No more than two names may be submitted for consideration at the first instance.

• After approval, the 20-day reservation for the name comes into effect.

Filing the Incorporation Form, SPICe+

The SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is a new 15-part company registration form integrated into the web-based application.

• Part A: Name reservation

• Part B: Incorporation application, PAN, TAN, EPFO, ESIC, GSTIN & professional tax registration (wherever applicable).

Submit this form together with the following attachments:

• Memorandum of Association (MOA)

• Articles of Association (AOA)

• Evidence of registered office (rent agreement/NOC/property documents)

• Details of Directors and subscriber(s) along with ID and address proof

• Declaration & Affidavits (format appended)

Payment of Fees and Stamp Duty

Fees are calculated on the basis of authorized capital and state of incorporation. Fees are paid online while filling up the SPICe+ form.
MCA reviews the application and issues a COI if the application is in order.

Post-Incorporation Formalities

Getting a COI is not the end of the process. After company registration, the following steps must be undertaken:

1. Company PAN and TAN

PAN and TAN are allotted along with the COI. PAN is required to open a bank account and to file income tax returns. TAN is required for deducting tax at source (TDS).

2. Opening a Bank Account

After getting the incorporation documents, a current account is opened in the name of the company.

3. GST Registration

If your turnover is above the prescribed limit or you are going to make interstate supplies, then you must register for GST.

4. Professional Tax (optional) (applicable only in certain states)

Some states, such as Maharashtra and Karnataka, have a professional tax. In those states, you will need to register for professional tax.

5. Commencement of Business

Within 180 days of incorporation, a company needs to file the INC-20A declaration stating that the company has received the share capital mentioned in the prospectus. This is a must-file before starting the business.

Common Mistakes to Avoid

• Selecting a name that is already a registered trademark

• Filing of INC-20A late

• Listing of residential addresses without NOC from the owner

• Non-filing of ROC returns (AOC-4, MGT-7 etc.)

• Failure to register for professional tax (if applicable)

In conclusion, starting a private limited company in India is not so complicated, but it requires legal details and proper documents. With the availability of the online system and government support, the process is fast and more organized. However, it is always advisable to take help from professionals, especially chartered accountants or company secretaries, during the establishment and initial regulations.

A private limited company provides your business with a strong legal layer, reliability in the market, and future opportunities to increase and collect resources. For every entrepreneur, it is serious to convert an idea into a permanent organization; Protecting the process is the first stage on the long journey of starting.