A Private limited company provides its shareholders with limited responsibilities or legal protection. In India, a private limited company lies between a partnership firm and a widely held public company. It can be incorporated with a minimum of two members.  A person may hold both the positions of shareholders and director in a private limited company.  

A private limited company’s members are only liable for the number of shares they own. After obtaining the certificate of incorporation, a private company formation in India can begin. It can be started in 15 working days.

Benefits of starting a Private Limited Company
 

A private limited company is the most acceptable company structure for entities looking to operate profitably and taking incorporated entity benefits, mainly limited liability. The private limited firm additionally provides limited responsibilities and minimal legislative compliances. Some other advantages are also listed below:

1. Limited liability
 

Limited liability means having a restricted amount of legal responsibility for a company’s debt. Unlike proprietorships and partnerships, limited liability companies place restrictions on the members' liability for the debts of the business.

To put it another way, a member's liability is limited to the face value of the shares they have purchased. The member's responsibility upon a winding-up is therefore limited to the amount remaining owned on their shares when a corporation is limited by shares.        

2. Separate legal entity
 

An entity is something that has a separate existence and an actual existence. A company is a juristic person and a legal entity formed under the Act. A juristic person is someone who is not a natural person or a human. As a result, a corporate form of organisation has extensive legal authority and is able to both own property and incur debt.  

The shareholders and directors of a company are not responsible to the company’s creditors for such debts. A private limited company is, therefore, a legal entity distinct from its members.  

3. Easy transferability of shares
 

A shareholder may transfer their shares of a corporation limited by shares to anyone else. Compared to the transfer of ownership in a company operated as a proprietary concern or partnership, the transfer is easy. It is easy to transfer shares by completing a share transfer form, signing it, and giving the share certificate to the buyer.   

4. Borrowing capacity
 

A company has better options for borrowing money. It is able to accept public deposits, issue secured and unsecured debentures, and more. Even banks and other financial institutions favour giving substantial financial support to businesses rather than to partnership companies or proprietary enterprises. 

5. Owning property 
 

A company being a juristic person, can obtain, hold, enjoy and alienate property in its own name because it is considered a legal person. As long as the company is still operating, no shareholder may assert any rights to its assets. The assets of the corporation do not belong to the shareholders. The actual owner of the business is itself  

Features of Private Limited Company 

Now you have known about the Private limited company and its benefits, you must know about its features listed below:

1. Membership
 

A minimum of two shareholders are necessary for Private company formation, just like any other. However, because it is a small company, there is a 200-member limit on the total number of members. Additionally, the company needs two directors to operate it.

2. Limited liability
 

Each shareholder or member’s responsibility is constrained in a private limited company. Therefore, the shareholders are required to sell their own assets to make up the difference even in the event of a loss in any circumstance. However, the shareholder’s private and individual assets are not at risk.         

3. Minimum paid-up capital
 

A private limited corporation must maintain a minimum paid-up capital of Rs. 1 lakh. It might increase if MCA decides to do so from time to time. It might increase if MCA decides to do so from time to time. 

4. Number of Directors
 

According to the Act, a private limited company must have a minimum of two directors and a maximum of fifteen.

5. Perpetual succession
 

Perpetual succession refers to the legal continuation of the business without any insolvency, bankruptcy, or the passing of any of its members. The company's existence will always be present.

Requirements for Private Company Formation 

Before a firm may be incorporated, it must meet a specific set of conditions. The following are the conditions for private company formation:

Members and Directors:
 

As previously stated, a private limited company must have a minimum of two and a maximum of 15 members in order to become legally registered. The Companies Act of 2013 requires this as a legal necessity.

The following requirements for directors should be met:

• A DIN, or director identification number, issued by the Ministry of Corporate Affairs should be carried by each director.
   
• A director must have spent at least 182 days in India during the preceding calendar year and must be an Indian resident.

Name of the company:
 

Choosing a company's name is frequently an important task. Three factors must be considered when choosing a name after private company formation:

• Basic name
• Tasks to be carried out
• Private Limited Company must be mentioned at the end of the company's name.  

Registered office address:
 

The permanent address of the registered office must be submitted to the company registrar after the private company formation process. The primary location for conducting business and the location where all documentation is kept is the company's registered office.

Obtaining necessary documents:
 

Every company is required to obtain a digital signature certificate that is used to validate the legitimacy of documents submitted electronically. There are other certificates and licences that need to be submitted by the owner of the company.

Procedures for registration of Private limited company

The steps for private company formation are as follows:

• Apply for Digital Signature Certificate:
  
  To file forms on the MCA portal and electronically sign papers like the e-MOA and e-AOA, all directors must receive a Digital Signature Certificate. Since they must include their DSC on the electronic versions of the Memorandum of Association (MOA) and Articles of Association (e-AOA), which must be filed with the registration; even the subscribers and witnesses of the MOA and AOA must receive DSC.
   

• Obtain Director Identification Number:
  
  A DIN must be obtained by anyone wishing to serve as a director of a company. You can serve as a director in any number of firms with just one DIN.
   

• Apply for Name Reservation:
  
  A "name reservation" is permitted in Part-A of the SPICe+ form, the company registration form. Two proposed names may be entered by a corporation in the SPICe+ form. If the name is rejected, the corporation must submit a new SPICe+ form together with the required money.

•  File the EMoa and EAOA for the private company formation:
  
  The SPICe+ form is linked with the e-MOA and e-AOA forms, which are submitted online through the MCA portal. The DSC of the MOA and AOA subscribers should be included on both forms.

• Apply for PAN and TAN:
  
  Through the SPICe+ form, an organisation can apply for a PAN and TAN. The system will automatically create the company’s PAN and TAN after the SPICe+ form has been submitted.

• Certificate of Incorporation:
  
  ROC will issue a Certificate of Incorporation with PAN and TAN.
   

• Approval:
  
  The ROC will accept the registration and issue a CIN (Corporate Identity Number) to the company if all the information on the SPICe+ form is accurate and has been submitted by the company.

Conclusion 

By reading this blog, you might have got some knowledge about private company formation and are willing to start your own private company following the specific rules mentioned above.  For smooth progress, it is necessary to consult with the appropriate parties and make the best decision. You can also contact our legal experts of Online Legal India for the registration process and other formalities.