GST Compensation Cess: A Comprehensive Guide
07 Jul, 2025
By Online Legal India
Published On 27 Sep 2022
Updated On 03 Jul 2025
Category Company Registration
A Private Limited Company ranks among the most popular business structures in India. It offers its owners limited liability and functions as a separate legal entity. This means the personal assets of shareholders remain safe in case of business losses. Entrepreneurs choose this model for its credibility, structured management, and ease of fundraising. Incorporation also provides legal recognition to the business. It helps in building trust, ensuring compliance, and securing growth opportunities in the long run. In this blog, you will learn about the incorporation of a Pvt. Ltd Company in India.
A Private Limited Company, commonly referred to as Pvt. Ltd., is a popular form of business in India. It allows a small group of individuals to hold ownership, usually family members or trusted associates. The company holds a distinct legal identity from its owners. This means it can own property, sue or be sued, and is responsible for its debts. Its shares cannot be traded publicly. One of the biggest advantages is limited liability, which ensures that the personal assets of its members remain safe from business risks or losses.
Here is the list of key features of a Private Limited Company:
The company holds a legal identity separate from its owners. It can own property, enter into contracts, and face legal action in its name. Shareholders are liable only to the extent of the unpaid amount on the shares they hold. Their assets remain protected from business losses or liabilities.
The company name must be unique and not match any existing registered name or trademark. The Ministry of Corporate Affairs (MCA) allows name reservation through the SPICe+ Part A form. Once approved, the name remains reserved for 20 days.
From June 30, 2025, every private company, except those classified as “small companies,” must convert physical share certificates into electronic form. The company must register with a Depository Participant and issue dematerialised shares. This rule helps ensure transparency and reduces fraud in shareholding.
Private companies must follow stricter timelines for annual and event-based filings. Forms like DIR-3 KYC, MGT-7, AOC-4, and INC-22A (ACTIVE) must be submitted before the deadlines. The MCA system automatically cross-verifies information using PAN, GSTIN, and Aadhaar. Late submission attracts penalties based on the number of days delayed.
Companies must disclose details of individuals who hold 25% or more ownership or exercise significant control. These individuals are called Beneficial Owners. The disclosure must be made through Form BEN-2. It ensures accountability and prevents the misuse of shell companies for illegal activities.
A Private Limited Company must disclose all related party transactions to its board. The directors must approve these transactions before execution. If the value exceeds specified limits, shareholder approval becomes necessary. This rule prevents misuse of company funds and ensures fairness.
A registered office address must be established within 30 days after the company is incorporated. It must be a physical location where documents can be delivered. Virtual offices or post boxes are not allowed. The company must submit proof of ownership or a rent agreement, along with a utility bill not older than 2 months.
Below are the eligibility criteria for incorporating a Pvt. Ltd company in India:
A Private Limited Company must have at least two shareholders. The maximum number allowed is 200. Shareholders may be individuals or corporate entities. Both Indian residents and foreign nationals can act as shareholders. However, foreign nationals must comply with the Foreign Direct Investment (FDI) rules under FEMA. Each shareholder must provide valid identity and address proof, such as a PAN card for Indian citizens and a passport for foreign citizens.
The company needs to have two directors at a minimum. At least one director must reside in India for 120 days or more in the financial year. The director must be at least 18 years old and mentally competent. A director must not have any disqualification under Section 164 of the Companies Act, 2013, such as past convictions or declared insolvency. Each director must have a Director Identification Number (DIN) issued by the MCA.
The company must provide a valid registered office address within 30 days of incorporation. This office must be located in India and must be a physical, accessible, and lockable space. The address can be residential or commercial, but it must not be a virtual office or post office box. The company must submit supporting documents like a recent utility bill (not older than 2 months), rent or ownership agreement, and a No Objection Certificate (NOC) from the property owner if the space is rented.
There is no minimum capital requirement for forming a Private Limited Company. The promoters can decide the amount of authorised and paid-up share capital based on the needs of the business. This provision allows flexibility and reduces the financial burden on startups and small enterprises. The capital amount must be declared in the incorporation documents and deposited in the company's bank account after registration.
Every director must obtain a Class 3 Digital Signature Certificate before submitting the incorporation application. The DSC is required to sign electronic forms on the MCA portal. The system uses two-factor authentication, including Aadhaar-based verification, to ensure the authenticity of the director’s identity. Without a valid DSC, the incorporation process cannot proceed.
The following documents are required for incorporating a Private company. Ltd Company:
Recent colour photographs of all directors and subscribers
MOA (INC 33) and AOA (INC 34), signed by shareholders and professionals
Here is the step-by-step process for the incorporation of a Private company. Ltd Company in India:
Step 1: Obtain Digital Signature Certificate (DSC)
Each proposed director and subscriber must obtain a Class 3 Digital Signature Certificate. The DSC is necessary to sign all electronic forms on the MCA portal. Aadhaar authentication is required for Indian citizens. Foreign nationals must submit notarised and apostilled identity documents to receive their DSC from certified authorities.
Step 2: Apply for Director Identification Number (DIN)
Each director receives a unique identification number known as a DIN. If a person does not already have a DIN, the number is automatically issued through SPICe+ Part B during incorporation. No separate DIN application is required unless the company appoints a new director after incorporation.
Step 3: Reserve Company Name through SPICe+ Part A
To select the company’s name, the applicant must submit SPICe+ Part A on the MCA website. The system checks the proposed names using AI to avoid conflicts with existing names, trademarks, or restricted words. Once approved, the name remains reserved for 20 days.
Step 4: Prepare Memorandum and Articles of Association
The Memorandum of Association (MOA) defines the company’s objectives. The Articles of Association (AOA) list internal rules and procedures. Both documents are prepared electronically as Form INC-33 (MOA) and Form INC-34 (AOA). The directors and subscribers must sign these documents digitally.
Step 5: Submit SPICe+ Part B and Linked Forms
After name approval, the applicant fills SPICe+ Part B with company details like capital, registered office, and business type. The form includes the following linked forms:
All documents must be digitally signed before uploading.
Step 6: Complete Pre-scrutiny and Upload the Forms
The MCA system performs an automatic check to ensure accuracy. After passing pre-scrutiny, the applicant downloads the generated PDF, signs it using the DSC, and uploads it to the MCA portal.
Step 7: Pay Government Fees and Stamp Duty
Once the forms are uploaded, the system calculates the applicable government fees and stamp duty. The fees depend on the authorised share capital and the state of incorporation. Companies with authorised capital up to Rs. 15 lakh are exempt from filing fees, but state-wise stamp duty still applies.
Step 8: Receive Certificate of Incorporation (COI)
After the Registrar of Companies (ROC) verifies all forms and documents, the MCA issues the Certificate of Incorporation (Form INC-11). The COI includes the company’s Corporate Identification Number (CIN), Permanent Account Number (PAN), and Tax Deduction Account Number (TAN). The system delivers these electronically within 48 hours.
Step 9: Open a Current Bank Account
After receiving the COI, the company must open a current bank account in its name. The directors must submit the COI, PAN, AOA, MOA, and KYC documents. The paid-up capital must be deposited into this account before starting business operations.
Step 10: File Declaration of Commencement (INC-20A)
Form INC-20A must be submitted within 180 days after the company is incorporated. This form confirms that the shareholders have deposited the subscribed capital into the company’s bank account. The company cannot start business or borrow funds until this declaration is filed and approved.
Here is a detailed explanation of government fees and stamp duty:
The SPICe+ filing fee is waived for companies with an authorised capital of up to Rs. 15 lakh. If the authorised capital exceeds Rs. 15 lakh, the Ministry of Corporate Affairs (MCA) charges a nominal fee based on defined slabs. This exemption benefits small businesses and startups with limited initial capital.
The Director Identification Number (DIN) is mandatory for all proposed directors. The MCA issues DIN automatically during the SPICe+ Part B process at a fee of Rs. 500 per director. If a director is appointed after incorporation, the company must file Form DIR-3 and pay the same fee again.
Each director and subscriber must obtain a Class 3 Digital Signature Certificate (DSC) to sign electronic forms. The MCA does not issue DSCs directly. Instead, directors must purchase them from authorised certifying authorities. The cost typically ranges between Rs. 1,000 and Rs. 1,500, depending on the provider.
For PAN and TAN, the MCA charges a combined fee of Rs. 131. These are generated automatically during incorporation and sent to the company's registered email address upon approval.
The name reservation fee is Rs. 1,000 when applying through SPICe+ Part A. This allows applicants to propose up to two names, and the approved name stays valid for 20 days.
The stamp duty applies to the MoA, AoA, and SPICe+ forms and varies by state and authorised capital. For instance, in Delhi, a company with Rs. 1 lakh capital pays around Rs. 200 each for MoA and AoA, and Rs. 10 for SPICe+. Other states may charge between Rs. 500 to Rs. 5,000 based on their respective stamp laws.
Below are the post-incorporation compliances:
The company conducts its first board meeting within 30 days of the date of incorporation. Directors disclose their interests through Form MBP-1. The board discusses key matters such as auditor appointment and bank account operations.
The board appoints the first statutory auditor within 30 days of incorporation. The auditor serves until the first Annual General Meeting (AGM). The company files Form ADT-1 with the Registrar of Companies (ROC) within 15 days of the board meeting.
The company issues share certificates to all subscribers within 60 days from the date of incorporation. The certificates include shareholder details and are stamped as per the applicable state laws.
The company files Form INC-20A to declare the commencement of business within 180 days of incorporation. It must attach the bank statement showing the credit of subscription money.
If the company does not submit the full address of its registered office during incorporation, it must file Form INC-22 within 30 days, along with address proof and utility bills.
The company holds its first AGM within nine months of the end of the first financial year. For future years, it must conduct the AGM within six months of year-end, not exceeding a 15-month gap between AGMs.
The company files Form AOC-4 for financial statements within 30 days of the AGM and Form MGT-7 or MGT-7A (required for One Person Companies (OPCs) and small companies) for the annual return within 60 days.
Each director must file Form DIR-3 KYC annually before 30 September to validate their identity and contact details.
If the company holds any loans or financial liabilities, it files Form DPT-3 before 30 June to report them.
If the company receives foreign funds, it files Form FC-GPR with the RBI within 30 days of share allotment and submits the FLA Return by 15 July each year.
Conclusion
Incorporating a private limited company gives a business a legal identity and protects the personal assets of its owners. It builds trust among investors, customers, and partners, which is essential for startups and growing businesses. Following the correct legal process helps avoid delays, penalties, or future disputes. If you want to register a Private Limited Company, contact Online Legal India to get assistance from their experts.
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