A Private Limited Company is a business entity held by small group of people. It is registered for pre-defined objects and owned by a group of members called shareholders. Startups and businesses with higher growth aspiration popularly choose Private Company as suitable business structure.
The business entity gets recognized as a Company through its registration under Companies Act of 2013 in India. The governing body is Ministry of Corporate Affairs, widely known as MCA. The definition of Private Company under the Act is provided here to understand its basics. Section 2 (68) of the Act defines a Private Company as under:
A:- Company having a minimum paid-up share capital as may be prescribed, and which by its articles,—
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred;
(iii) prohibits any invitation to the public to subscribe for any securities of the company
From the basic reading, we understand that a Private Company’s share transfer is restricted with some of the conditions. Further, if its members exceed 200, it stops to be a Private Company. It further inherits the prohibition to invite the public at large to subscribe any securities. In absence of any of these conditions, the company loses its identity as a Private Company
One Person Company registration in India is a type of entity where there are lesser compliances requirements than that of a Private Limited Company. A One Person Company Registration in India can be obtained under the Companies Act 2013 with just one single member and one Director.
An LLP must be registered under the LLP Act to operate its business. However, the registration of a partnership firm is voluntary under the Partnership Act, 1932. The liability of each partner is limited to the contribution made by the partner in an LLP.
There is no requirement of minimum paid-up capital to start a private limited company or a one-person company. However, the public limited company must have a minimum paid-up capital of Rs. 5 lakh.
A director is a person appointed or elected to manage an organization's business or administrative functions. Directors manage the everyday operations of a company and organizations usually list their information on Companies Register.
Limited liability partnerships (LLPs) allow for a partnership structure where each partner's liabilities are limited to the amount they put into the business. Having business partners means spreading the risk, leveraging individual skills and expertise, and establishing a division of labor.
DIN is a unique Identification Number allotted to an individual who is appointed as a director of a company, upon making an application in form DIR-3 pursuant to section 153 & 154 of the Companies Act, 2013.
Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates.
The Act has a dedicated provision which is Section 162 that underlines the reasons for which a person may not appoint as a director. There is no such provision regarding the qualification under the Act. However, requirements can be listed as below:
CIN is the number allotted to a company registered in India by the Ministry of Corporate Affairs, Government of India. CIN is 21 digit number that contains the information such a Status (listed /unlisted), NIC code of business activity, state of registration, Year of registration, Private or Public and the registration Number in the respective state.
A private limited company needs a minimum of 2 directors and a maximum of 15 directors to register a company.
Yes, any foreign nationals, entity or an NRI can become a director or shareholder of a private limited company in India.
Entrepreneurs in the process of beginning a company registration are interested in knowing about the list of documents required for the process. In this article, we provide details and descriptions of the documents required for company registration.
The following documents are mandatory for Indian Nationals for incorporation of company in India:
PAN Card: PAN Card copy of the proposed Directors of the Company will be required for Company Registration. PAN or Permanent Account Number is a unique identification number issued by the Department of Income Tax in India. It is mandatory for Directors who are Indian Nationals to submit PAN during the incorporation process.
Note: The name on the PAN Card will be used by the Ministry of Corporate Affairs for all matters pertaining to the company. Hence, in case of mistake in the name mentioned in the PAN Card or name change due to marriage or any other reason, the PAN Card must be first changed.
Address Proof: In addition to the PAN Card copy, the proposed Director must submit an address proof. The address proof submitted must have the name of the Director as mentioned in the PAN Card and the most current address of the Director. Further, the document must also not be older than 2 months. The following documents are acceptable address proof for Indian Nationals.
In addition to providing identity, address and residential address for the Directors, proof must be provided to validate the registered office address of the Company. The following documents must be submitted as proof of registered office during the company registration process or within 30 days of incorporation of the company.
The identity and address proof as detailed in the article must be submitted for all the shareholders of the Company (i.e., subscribers to the Memorandum of Association (MOA) and Articles of Association (AOA).
A Memorandum of Association (MoA) represents the charter of the company. It is a legal document prepared during the formation and registration process of a company to define its relationship with shareholders and it specifies the objectives for which the company has been formed.
An Article of Association ( AoA ) lays down the rules and regulations for the internal management of the company. It specifies the duties, rights, and powers of the management of the company. An Article of Association is subsidiary to the Memorandum of Association(MoA).
The Subscribers' Sheet to the Memorandum is an important document of proof that is to be submitted at the incorporation stage of the company. It provides details regarding the first members of the company and the respective shares held by them at the time.
A shareholder is someone who owns shares in a limited company. They own the company along with other shareholders (if there are others). A subscriber is the name for
someone who was a shareholder at the time of the company's incorporation. br
Is a subscriber a director?
Yes, the Director of a company is able to be appointed as a Subscriber. The subscriber is the original shareholder and can be any individual or company who would hold shares in the company. This includes the Director and Secretary as well as any other individual or company.
Designated Partners is a concept introduced by the Limited Liability Partnership Act, 2008. Designated Partners are similar to Directors of a Private Limited Company. A Designated Partner in a LLP when compared to the Director of a Company, enjoy more rights and priviledges.
Any person who joins the partnership business with other persons is individually called “partner” and collectively known as “firm”. Conversely,
Designated Partner implies any partner recognized as such in the incorporation document, at the time of registration of the Limited Liability Partnership
Can husband and wife be partners LLP? There is a special agreement pertaining to tax liability that can be made so as to minimize the family tax liability.
A person who has sufficient money or interest in the firm, but cannot devote his time to the business, can act as a sleeping partner in the firm. However, he is bound by all the acts of the other partners. A sleeping partner like any other partner brings share capital to the firm.
The designated partner would be responsible for the doing of all acts, matters and things as are required to be done by the LLP in respect of compliance of the said Act; and liable to all penalties imposed on the LLP for any contravention of those provisions.
LLPs are also not as recognized in India as a private limited company, since it is a relatively new concept. Private limited company offers its promoters a better image or standing than that of a LLP. Private limited company also enjoys better access to funding from banks and foreign direct investment.
No, an LLP cannot be converted into an OPC. Limited Liability Partnership Rules, 2009 does not contain any provisions for the conversion of an LLP into a One Person Company.
One of the best advantages of having a Private limited company is that foreign nationals and NRIs can quickly start the PLC in India. Also, 100 percent FDI under the automatic approval route is accessible in the Private Limited Company. But in the OPC, only the citizens of India are allowed to commence the company.
OPC enjoys many exemptions compared to a Private Limited Company in form of requirement for AGM, Board Meeting and more. As there is only one member and the director, it does not require holding the meetings like a private company
The OPC is best for people who want to start a business with a corporate structure but still want to retain effective control over all the business operations. You can scale the company and still enjoy limited liability.
It is a company is a private company, OPC can raise funds through venture capital, financial institutions, angel investors, etc. An OPC can raise funds thus graduating itself to a private limited company.
An OPC is effectively a company that has only one shareholder as its member. A Private Limited Company is the form of the company where minimum two members are required and maximum number of members can be 200. The liability of the members of a Private Limited Company is limited to the amount of shares held by them.
An OPC gives the advantage of limited liability to entrepreneurs whereby the liability of the member will be limited to the unpaid subscription money. This benefit is not available in case of a sole proprietorship. “Thus OPC allows an individual to take risks without risking his/her personal assets”.
It is clarified that as per section 5 of LLP Act, 2008 only an individual or body corporate may be a partner in a Limited Liability Partnership. An HUF cannot be treated as a body corporate for the purposes of LLP Act, 2008. Therefore, a HUF or its Karta cannot become designated partner in LLP.