What is Private Company?

Private company is a form of corporate entity which comes under the ownership of fewer persons. This form of organization is best suitable for small businesses or the business where one doesn’t want the interference of public in large. For e.g. a company in the business of logistics in which all the members of the company are from one family.

Private company is a separate legal entity. Which means it possesses distinct existence as a legal artificial person.

Private company limited by its shares or unlimited company has its shareholders as its owners. Percentage of shareholding defines percentage of ownership.

Board of directors looks after the decisions to be taken on behalf of company. However large number of decisions has to get approved by the shareholders of the company.

What You Will Get?

  • DIN for 2 Directors

  • DSC for 2 Directors

  • Company Name Approval

  • MOA + AOA

  • Incorporation Certificate

  • Company PAN

  • Company TAN

  • Bank Account Opening Document Support

What We Need?

For Shareholders/Directors

  • PAN Card (Mandatory)
  • Aadhar Card (Mandatory)
  • Address Proof (Bank Statement, Mobile Bill, Telephone Bill)
  • Identity Proof (Passport, Driving License, Voter ID)
  • Passport size photo (scan copy)

For Registered Office

  • Ownership Proof (Electricity Bill etc)
  • Utility Bill (Gas Bill, Electricity Bill)
  • NOC (Download format)

What Is The Process?

Application for reservation of name

One can reserve the proposed name of the company through web-based application called RUN (Reserve Unique Name) for Company Registration.
It is to be noted that the name of a private limited company shall end with the words “Private Limited” for e.g. ABC PRIVATE LIMITED.

Application for Incorporation

Option – I

Incorporation through e-form series named SPICe (Without filling Reserve Unique Name application):

This form provides for 5 different services those are

  • Name Reservation,
  • Allotment of Director Identification number (DIN),
  • Incorporation of New Company,
  • Allotment of New PAN,
  • Allotment of New TAN,

Option – II

Incorporation through SPICe (after filling Reserve Unique Name application):

In this, one can reserve the name of proposed company through web based service called RUN (Reserve Unique Name application).
This time one can apply for following services through SPICe:

  • Allotment of Director Identification number (DIN),
  • Incorporation of New Company,
  • Allotment of PAN and Allotment of TAN

Incorporation: After name approval through RUN, series of Form SPICe shall be filed for incorporation of the company within 20 days from the date of approval of the name through RUN.

Attachments to the form to be filed with Registrar of Companies:

  • Memorandum of Association
  • Articles of Association
  • Residential proof of the members
  • Copy of PAN card of member
  • Affidavit from the subscribers
  • List of all the companies (specifying their CIN) having the same registered office address, if any;
  • Proof of Registered Office address (Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts)
  • Proof that the Company is permitted to use the address as the registered office of the Company if the same is owned by any other entity/Person (not taken on lease by company)
  • Consent from Director to act as director
  • Declaration by first subscriber(s) and director(s)

Once the Form is processed and found complete, a company is registered and Corporate Identity Number (CIN) is allocated to the company through Incorporation Certificate. This incorporation certificate is a proof that all the requirements for formation of the company have been fulfilled.

Advantages and Disadvantages

Advantages

  • Separate legal entity:
    Private Company is a separate legal entity and therefore, can be sued or it can sue others without involving the members whereas a partnership firm is not distinct from its partners. There is no partnership without partners.
  • Perpetual succession:
    Private Company has perpetual succession, i.e. the death or insolvency of a shareholder/member or all of them does not affect the existence of the company.
  • Liability:
    Liability in case of a private company limited by shares or guarantee is restricted to the extent of amount payable on shares or amount guaranteed as a contribution, as the case may be.
  • Number of Members/ shareholders:
    For formation of private company only 2 persons are required.
  • Number of directors:
    Only 2 directors are required.
  • Profit:
    Shareholders of the company having share capital can share profit in form of dividend.
  • Capital:
    No minimum paid up capital is required.
  • Tax:
    Tax rate for some private companies is discounted to 25%.
  • Assets:In a private company, assets belong to the company itself and not to the individuals comprising it.
  • Lesser compliances:
    The compliances for a private company are much lesser as compare to that for public companies.
  • No restrictions on managerial remuneration.
  • No retirement by rotation of directors.
  • Private company enjoys higher business secrecy as compared to public company.

Disadvantages

  • Transferability of shares: Shares are not freely transferable.
  • Prohibition for subscription: Shares are not freely transferable.
  • Funds: Shares are not freely transferable.
  • Higher compliances as compare to One Person Company.

Compare Other Options

Headings Partnership Sole Proprietorship Private Company LLP
Governing Law Partnership Act, 1932 Shop & Establishment Act Companies Act Limited Liability Partnership Act, 2008
Separate Legal Existence Doesn’t have Separate Legal Existence Doesn’t have Separate Legal Existence Has Separate Legal Existence Has Separate Legal Existence
Liability of owner Always unlimited Always unlimited Limited if company is limited by shares or guarantee Always limited
Classification No such classification No such classification Limited by shares, limited by guarantee, unlimited No such classification
Agreement Yes. Required. Not required Not required Yes. Required.
Taxation 30% Income of the proprietorship is treated as the income of the proprietor and taxed accordingly. 25% for some companies 30%
Number of persons Minimum 2
Maximum 20		 Minimum one Minimum 2
Maximum 200		 Minimum 2 partners
Designated partners — — Minimum 1
Maximum 15		 Minimum 2 designated partners
Ownership Partners Owner Shareholders Partners
Name — — suffix Private limited or Private company suffix LLP
Capital Share Capital In form of cash and infrastructure only Share capital Contribution by Partners

What After Incorporating Compliance?

Hold first Board Meeting within 30 days of incorporation.

Opening company’s Bank Account within 30 days of Incorporation.

Depositing of share capital money into bank account within 60 days of Incorporation.

Issue of share certificate within 2 month of Incorporation.

Provisioning of Maintenance of Statutory Registers, like register of members etc.

Appointment of first auditor within 30 days of Incorporation.

Private company has to file its Financial Statements with the concerned ROC within 30 days from the date of AGM of the company every year. It will contain the Balance Sheet, Profit and Loss Account, Directors’ Report, and the Consolidated Financial Statement.

Private company should file its annual return for the period ending on 31st March within 60 days of completion of AGM every year.

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