Private Limited Company (Pvt Ltd)
Ideal for startups & growing businesses seeking investment.
Private Limited Company Registration in India
Key Features of Private Limited Company Registration in India
Feature | Details |
Limited Liability Protection | Shareholders are liable only up to the extent of their shareholding, protecting personal assets from company losses. |
Separate Legal Entity | The company has its own legal identity, allowing it to own assets, enter contracts, and engage in legal proceedings. |
Minimum Shareholders | Requires at least 2 shareholders and can have up to 200 shareholders. |
Minimum Directors | Needs a minimum of 2 directors, with at least one Indian citizen. |
Minimum Share Capital | A private limited company must maintain a minimum paid-up capital of ₹1 lakh or as specified. |
Company Name Requirement | The company's name must end with "Private Limited" to indicate its legal structure. |
Restrictions on Share Transfer | Shares cannot be freely transferred; they require Board of Directors' approval or compliance with the Articles of Association (AOA). |
Prohibition on Public Investment | Cannot invite the public to subscribe to shares or debentures, unlike public limited companies. |
Compliance Obligations | Must comply with ROC filings, annual returns, AGM meetings, and financial record maintenance as per the Companies Act. |
Types of Private Limited Companies
Company Limited by Shares: Liability is limited to the amount unpaid on shares.
Company Limited by Guarantee: Liability is limited to the guarantee amount, activated upon winding up.
Unlimited Company: Members have unlimited liability, though the company remains a separate legal entity.
Advantages and Disadvantages of a Private Limited Company
Disadvantages | Advantages |
Compliance Burden – Regular financial reporting, statutory filings, and audits increase administrative work. | Limited Liability – Shareholders' personal assets are protected, as liability is limited to their shareholding. |
Complex Setup – Incorporation is time-consuming and expensive compared to simpler business structures. | Distinct Legal Identity – The company can own assets, enter contracts, and sue or be sued. |
Share Limits – Cannot have more than 200 shareholders, restricting scalability. | Continuous Existence – The company continues despite changes in ownership or management. |
Public Disclosure – Financial statements and compliance details are publicly accessible, reducing privacy. | Ease of Funding – Easier to raise capital from venture capitalists, angel investors, and private equity. |
Exit Complexity – Transferring ownership or exiting the company can be complicated. | Tax Benefits – Eligible for various tax exemptions and incentives. |
Slower Decision-Making – Multiple shareholders and directors can slow down decisions. | Credibility and Trust – The "Pvt. Ltd." tag enhances reputation among customers, suppliers, and investors. |
Documents Required for Registration
Category | Documents Required |
Shareholder/Directors' Documents | PAN Card, Aadhaar Card, Bank Statement/Utility Bill/Telephone Bill, Passport-size Photo, Driving License/Passport/Voter ID |
Additional Details | Mobile Number & Email ID of Directors and Company, Occupation, Qualification |
Registered Office Documents | Rental Agreement (if rented), Electricity Bill (not older than two months) |
Post-Registration Compliance
Auditor Appointment
Must be done within 30 days of company incorporation.
Requires a registered Chartered Accountant (CA).
Director DIN KYC
Annual process for directors with a DIN.
Verifies registered phone number and email with the Ministry of Corporate Affairs (MCA).
Commencement of Business
Must be completed within 180 days of incorporation.
Shareholders must deposit the subscription amount specified in the MOA into the company's bank account.
A bank current account must be created for the company.
MCA Annual Filings
Companies must submit financial statements annually.
Forms Required: MGT-7 (Annual return), AOC-4 (Financial statements).
Digitally signed by Directors and a working professional.
Income Tax Filing
Companies must file an income tax return each financial year using Form ITR-6.
Must be digitally signed using the Director's digital signature.
Ensuring these compliances are met is crucial for smooth operations and regulatory compliance.
Comparison: Proprietorship vs. Partnership vs. LLP vs. Private Limited Company
Feature | Proprietorship | Partnership | LLP (Limited Liability Partnership) | Private Limited Company |
Definition | Single-owner, unregistered business. | Two or more persons running a business. | Hybrid with features of a partnership and a company. | Registered entity with limited liability. |
Legal Identity | Not separate from owner. | Not separate from partners. | Separate Legal Entity. | Separate Legal Entity. |
Ownership | One person (Sole Proprietor). | Min 2 Partners, Max 50 Partners. | Min 2 Designated Partners. | Min 2 Shareholders, Max 200 Shareholders. |
Liability | Unlimited (owner is personally liable). | Unlimited (partners are responsible). | Limited (partners' personal assets are protected). | Limited (liability limited to shares owned). |
Registration Time | 7-9 working days. | 7-9 working days. | 7-10 working days. | 10-15 working days. |
Registration Cost | Low. | Moderate. | Higher than partnership. | Higher than LLP. |
Formation Process | Simple (GST, MSME registration if needed). | Requires Partnership Deed and PAN registration. | Needs LLP Agreement + MCA Incorporation. | Requires MOA, AOA, DIN, and Incorporation Certificate. |
Taxation | Individual tax slab rates. | 30% + surcharge. | 30% + surcharge. | Corporate tax rate (15% for new companies, 22-25% for others). |
Compliance Requirements | Minimal. | Moderate (Partnership Deed, PAN, GST filings). | MCA compliance (Form 11, Form 8) & ITR-5. | Strict compliance (ITR-6, MCA filings, Board Meetings, etc.). |
Audit Requirement | Not mandatory unless turnover > ₹1 crore. | Not mandatory unless turnover > ₹50 lakh. | Mandatory if turnover > ₹40 lakh or contribution > ₹25 lakh. | Mandatory if turnover > ₹1 crore. |
Transfer of Ownership | Difficult (Owner change dissolves business). | Possible but complex. | Easier (Partner changes allowed with agreement update). | Easiest (Shares can be transferred). |
Continuity | Ends if owner dies or retires. | Ends if a partner leaves (unless deed allows continuity). | Continues even if a partner leaves. | Perpetual existence. |
Funding & Investment | Difficult. | Difficult. | Moderate. | Easiest (Venture capital, angel investors, private equity). |
Public Trust & Credibility | Low. | Moderate. | High. | Very High. |