Private Company – Intro:
Private Limited Companies is the most common and suitable form of entity for carrying out business in India with a long term objective. A Private Limited Company is Incorporated and Governed by the Indian Companies Act 2013. Private Limited Company is a Purely Separate Legal entity distinct from its members and directors. The business under this structure can be done by making investment through the equity shares in the Company. It has the advantage of limited liability, greater stability and recognition. The Basic Requirement for a private Limited Company in India is to have Minimum Two Directors and Two Shareholders.
- These are closely held businesses usually by family, friends and relatives.
- Private companies may issue stock and have shareholders their shares need not be traded on public exchanges and are not required to be issued through an initial public offering.
- Shareholders may not be able sell their shares without the agreement of the other existing Shareholders.
Benefits/Advantages of Private Company Incorporation/Formation:
- LIMITED LIABILITY: If the company experience financial distress because of normal business activity, the personal assets of shareholders/owners will not be at risk of being seized by creditors.
- SEPARATE LEGAL ENTITY: A company is a legal entity and a juristic person established under the Act. Therefore a company has legal capacity to own property and incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts
- CONTINUITY OF EXISTENCE: The existence of company cannot be affected by owners. They may come, change and go but the company will run until it is legally dissolved. A company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership.
- MINIMUM NUMBER OF SHAREHOLDERS: The Minimum Members need to start the business are only2.
- SCOPE OF EXPANSION IS HIGHER: A company has various options for borrowing of funds. It can raise funds by issuance of shares, debentures etc. Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.
- EASY TRANSFERABILITY OF OWNERSHIP: The Ownership (shares) of Company is easily transferable by a shareholder to any other person after Filing and signing a share transfer form at any price mutually agreed between both. Therefore, the Capital infused can be taken back easily
- OWNING PROPERTY: A company being a legal person, can acquire, own, enjoy and alienate, property in its own name. No shareholder/director can make any claim upon the property of the company so long as the company is a going concern.
- CAPACITY TO SUE AND BE SUED: The Company being legal person has full right like a natural person to institute legal proceedings against or to bring a suit in a court of law and also can be sued in its own name.
- MULTIPLE RELATIONSHIPS: In a company a person can at the same time be a shareholder, creditor, director and also an employee of the company.
Documents Required for Private Company Formation :
- Self-attested Copy of PAN Card of all the Proposed Directors.
- Self-attested Copy of ADDRESS PROOF of all the Proposed Directors.
- Self-attested Copy of Bank Account Statement/Electricity Bill of all the Proposed Directors.
- Passport Size Photographs of all the Proposed Directors.
- Duly signed DSC Form of The Authorized Signatory of the Proposed Company.
- Copy of Current Electricity Bill/Water Bill/House Tax etc. for The Premises Proposed to be used as Registered Office of the Company.
- If the Property is Rented, then Rent Agreement.
Charges for incorporation of a private company for starting a new business:
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