Comprehensive Guide To Setting Up A Private Limited Company In India
Introduction:
The Companies Act of 2013 lays down the framework for incorporation of a company in India, but the most preferred form of a company is a private limited company. Such companies offer limited liability, corporate identity, and the capacity to raise funds from the public. At least two members and at most fifty members are mandated. A limited company is the most common form of corporate structure. Unlimited companies are a rather rare form. The liability of directors is limited. They are protected in case their company fails to pay its debts. The incorporation can be done with the Ministry of Corporate Affairs, which requires registration of Memorandum of Association and Articles of Association with the Registrar of State Companies. The process is initiated through the MCA portal online using a simplified SPICe+ form for company registration. A private limited company is, therefore generally preferred due to its operational flexibility, tax benefits, and easier access to funding compared to other business structures in India.
Table of Contents
Steps for Incorporating a Private Company in India:
1. Decide a Company Name
The first step in incorporating a private limited company is that of deciding an appropriate name. The name should reveal the nature of the business and should be unique. The proposed name must comply with the naming provisions given in Section 4(2) and (3) of the Companies Act, 2013, and Rule 8 of the Companies (Incorporation) Rules, 2014. The name should not use any words that are disallowed or restricted. You can make an application for up to two names.
The name should be searched against existing trademarks and businesses through the official portal of the MCA. A name reservation request should be submitted through the MCA portal either through the SPICe+ application or the RUN (Reserve Unique Name) service, which is used for name changes also. No objection from third parties will reserve the name for 20 days.
2. Apply for Digital Signature Certificate (DSC)
DSC is mandatory for all the directors of the company to fill in the online forms submitted to the Ministry of Corporate Affairs or MCA. The DSC acts as an effective online authentication tool while keeping the submitted data free of tampering. This is possible because the DSC can be obtained from government-authorized certifying agencies. The DSC should be applied for as early as possible to avoid delays in the registration process.
3. Apply for Director Identification Number (DIN)
Every director of the company requires a DIN. A DIN is a unique identification number given by the MCA to people who intend to act as directors in a specific company. The DIN can be applied through the SPICe+ form. For verification, directors will need to provide personal information, comprising proof of identity and address. Provided the director has already obtained a DIN for his earlier companies, he will not have to apply for a fresh one.
4. Submission of SPICe+ Form INC-32
Once the name is reserved, and the required digital signatures and DIN is achieved, the SPICe+ (INC-32) form should then be filed. This is an integrated form that simplifies the entire process of incorporating a company; it integrates all applications for reservation of name of the proposed company, DIN, PAN, TAN, and GST registration in one application.
The two parts of the SPICe+ form are:
Part A has name reservation. During this service, you give information like the type, class, and category of the company, the primary business activity, and the proposed company name. The name is searched for and, upon approval, reserved for a period of 20 days, which can be extended up to 60 days for an additional fee of ₹2,000.
Part B This includes the incorporation details of a company. Information regarding subscriber details (shareholders), director particulars including DIN, PAN and passport, along with the authorized and paid-up capital of the company. The registered office address must be provided along with a No Objection Certificate (NOC) from the property owner and recent utility bills. While for One Person Companies (OPC), a nominee is mandatory. Additional documentation required is the Memorandum of Association (MOA) and Articles of Association (AOA). Declarations are also submitted with form INC-9.
5. Attachments for Part B of SPICe+
To file Part B of the SPICe+ form while incorporating a private limited company in India, there are various attachments mandatory to be done by filling up the application process. The MOA and AOA describe the objects of the company and the internal rules, which regulate its management. Moreover, proof of the identity and address of the directors and subscribers must be attached, including PAN cards, passport copies, and utility bills.
In addition to that, proof of office address, which might be a lease agreement, utility bills, or property ownership documents, is also required. When the office is rented, a No Objection Certificate (NOC) from the property owner of the registered office is required. Last but not least, TAN and PAN applications are to be submitted along with the SPICe+ form. This includes providing details like area and range codes, as well as the source of income for the company. These documents ensure legal compliance and aid in the smooth processing of the company’s registration.
6. Payment of Fees
Some statutory fees have to be paid during the incorporation process. This includes the name reservation fees, SPICe+ filing fee, stamp duty on documents, and application charge for a DIN (if applicable). This can be paid online through the MCA portal
7. Certificate of Incorporation
Once the SPICe+ form is submitted along with all other documents and duly reviewed, the MCA will pass the same. Once passed, the MCA will issue the Certificate of Incorporation (COI) indicating that the company is finally on the register. The COI carries the Corporate Identification Number (CIN) upon which all business transactions and compliance requirements are to be accessed in the future.
8. Post-Incorporation Formalities
After incorporation of a private limited company in India, various post-registration tasks have to be performed. These include opening a corporate bank account with the Certificate of Incorporation, PAN, and proof of the company’s registered address. Once more, if the company’s turnover exceeds the prescribed limit, a GST registration is essential. The company then files annual returns and financial statements with the Ministry of Corporate Affairs (MCA). A first board meeting must take place within a 30 days period after incorporation, and auditors must be appointed within that 30 days period. The company is also required to issue share certificates to its subscribers.
Ongoing compliance includes an annual director’s report with financial statements, audits by a qualified Chartered Accountant (CA), and returns of income tax under the company’s performance. The company is supposed to hold an Annual General Meeting each year as per the stipulations provided in the Companies Act. These obligations ensure legal and financial transparency and compliance with regulatory requirements.
Conclusion:
In the light of the above, the process to form a private limited company in India is structured and detailed, covered under the Companies Act of 2013. From choosing an appropriate name for the proposed company to post-incorporation formalities, adequate care has to be taken towards legal and regulatory provisions. For all the said approvals, such as the DSC, DIN, and SPICe+ are to be duly completed to simplify the complete registration process.
It also involves other important components such as attachments, fee payments, and the issuance of the Certificate of Incorporation. After incorporation, the company has to perform several post-registration responsibilities, for example, opening its bank account, obtaining GST registration, conducting annual filings, and meetings. Such continuous legal and financial compliance ensures the viability of a company over the lifetime of its existence. All these steps, when carefully followed, lead entrepreneurs to a sound basis for a business and ensure a legitimate business set up in India.
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