What are the Prerequisites to Incorporate a Private Limited Company?
In this startup era, private limited company registrations are on the rise. More and more startup enthusiasts are creating their companies in order to be the next Google and Microsoft. However, for incorporating a private limited company in India, a defined procedure needs to be followed.
Private limited companies in India are governed by the Companies Act, 2013 and regulated by the Ministry of Corporate Affairs. For private limited company registrations, an online incorporation procedure shall be completed. In this guide, we have discussed the prequisites to incorporate a private limited company in India. Let’s begin!
Pre-requisites to Incorporate Private Limited Company in India
Following are the pre-requisites for incorporating a private limited company in India:
Obtain DSC: First and foremost, the prospective directors of a private limited company shall obtain Digital Signature Certificates. The application and process for registration of DSC are entirely online and it can be registered and obtained within just 1 day. DSC is mandatory for the signing of all the digital forms associated with the private limited company.
Apply for Director Identification Number (DIN): After obtaining DSC, the prospective directors shall proceed to apply for a director identification number. Application for DIN can either be filed separately or can be applied for at the time of filing application for incorporation of the private limited company.
Apply for Reservation of Name: Before filing the application for incorporation of the company, you can check whether the name of the company is available on the MCA portal. Once you conduct the name search, you can apply for a reservation of your company’s name. Reservation of name can be applied for while filing the application for incorporation of the company.
Filing Application for Incorporation of the Company: You can apply for incorporation of private limited company by filing Form SPICe+ form. Apart from the incorporation of the company, SPICe+ allows you to apply for DIN for a maximum of 3 directors as well as apply for reservation of name. SPICe+ contains two parts. After furnishing details in Part-A, either you can apply for reservation of name or directly proceed with the incorporation of the company.
Obtain Multiple Registrations: With SPICe+, you can obtain other regulatory registrations as well. This include:
- Director Identification Number allotment
- Reservation of the name
- Application for incorporation of the company
- PAN and TAN application
- EPFO registration
- ESIC registration
- Professional tax registration
- Registration under Goods and Services Tax Act, 2017
- Opening of a bank account of the company
Details filled in the SPICe+ form get automatically linked to other forms like AGILE-PRO, URC-1, INC-9 etc.
eMOA and eAOA: Parting ways with the conventional MOA and AOA, MCA now allows you to file eMOA and eAOA. For eMOA, necessary details as required under various clauses shall be furnished online. For eAOA, a draft AOA, as per the Table applicable to the company, is available online. Necessary changes can be done at the applicant’s discretion. Once completed, eMOA and eAOA can be filed online.
Obtain Certificate of Incorporation: After the application for private limited company registration online, the registrar will scrutinise the application. If he is satisfied with the particulars and information furnished, then the application will be approved by issuing the certificate of incorporation. A Corporate Identification Number (CIN) shall be issued along with the certificate of incorporation.
Benefits of Incorporation of Private Limited Companies
Incorporating a private limited company opens the door for endless opportunities of growth and expansion. It is one of the most preferred and formal constitutions of business. Following are the benefits of private limited company registration in India:
Limited Liability: The foremost benefit of private limited company registration in India is that it limits the liability of the shareholders of the company. The liability is limited to the amount of capital unpaid on the shares held by them.
Perpetual Succession: A private limited company enjoys perpetual succession. Therefore, the company will continue to remain in existence until dissolved.
Raising of Funds: It is relatively easier to raise funding from the investors if you are operating as a private limited company. This is the reason why most of the budding startups operate as private limited companies.
Tax Benefits: The tax rates for private limited companies are lower as compared to partnership firms and LLPs that pay a minimum of 30% tax plus applicable surcharge and cess. Even the proprietors have to pay 30% tax if their total income crosses the threshold limit of Rs. 10 lakhs.
However, if the turnover or gross receipts of the company did not exceed Rs. 400 crores during the financial year 2018-19, then the tax rate applicable for the company shall be 25% instead of 30%. Further, the government also provides a concessional taxation regime whereby if the company fulfills certain conditions, then it can pay tax at the rate of 22% or 15% under Section 115BAA or Section 115BAB of the Income Tax Act, 1961 respectively.
Separate Legal Existence: The company has a separate legal existence from its shareholders and members. Therefore, the company can borrow money and hold the properties in its own name, can sue and be sued in its own name.
In a Nutshell
Therefore, if you are planning to start your business or looking towards expanding your existing business, then you shall proceed with the private limited company registration. For registration of your private limited company, an online application shall be filed and there is no physical paperwork involved making the entire incorporation process seamless and time-efficient. Contact your eAuditors now to register private limited company online.
Author : Dipen
Date : 13-Jul-2022