A private limited company offers limited liability to its owners and is well-suited for a small group of shareholders, accommodating up to 200 members while allowing flexibility in shares and shareholdings.

When opting for a Limited Liability Partnership (LLP), the partners themselves manage the business. Conversely, with a private limited company registration, directors and shareholders are distinct entities.

As your reliable legal advisor, Vakilsearch provides a cost-effective service for registering your company in India. We manage all legal procedures, ensuring compliance with regulations set by the Ministry of Corporate Affairs (MCA). Upon successful completion of the private limited company registration process, we furnish you with an Incorporation Certificate (CoI), as well as PAN and TAN documents. Armed with these, you can effortlessly open a current bank account and kickstart your business operations.

Types of Private Limited Companies

Private limited companies can be classified into three main categories based on the extent of shareholders' or members' liability:

• Company Limited by Shares: Shareholders' liability is confined to the nominal share value stated in the Memorandum of Association. This means that in the event of the company's liquidation, shareholders are liable to pay only the face value of their shares.
• Company Limited by Guarantee: Members' liability is restricted to the predetermined guarantee amount outlined in the Memorandum of Association. This obligation arises solely during the winding-up process. In this case, members agree to contribute a specific amount towards the company's liabilities in case of liquidation. However, they are not required to pay this amount during the company's regular operations.
• Unlimited Companies: Members of unlimited companies bear unrestricted personal liability for the company's debts and obligations. Despite this, they retain their status as a distinct legal entity, shielding individual members from direct lawsuit. This type of liability structure is less common and is often found in professional partnerships where members are willing to accept unlimited liability to maintain their professional independence.

It is essential to choose the appropriate liability structure when forming a private limited company, considering factors such as the nature of the business, potential risks, and financial stability. Consulting a legal or financial advisor can help you make an informed decision and ensure compliance with relevant regulations.

• Limited Liability: This is a significant advantage, safeguarding the personal assets of shareholders from business debts. In times of financial distress, creditors can only pursue the company's assets, not the personal belongings of shareholders.
• Suitable for Small Groups: Unlike a sole proprietorship, a Pvt Ltd Company can accommodate up to 200 members (shareholders), making it ideal for small groups of founders or investors to collaborate.
• Flexibility in Shares: Pvt Ltd Companies offer greater flexibility in structuring share ownership compared to simpler structures. This facilitates attracting investment and defining voting rights based on the shareholding structure.
• Increased Credibility: A Pvt Ltd Company registration conveys a more professional image compared to a sole proprietorship. This can prove advantageous when seeking loans, attracting investors, or establishing business partnerships.
• Perpetual Existence: Unlike a proprietorship that ceases with the owner's death, a Pvt Ltd Company enjoys separate legal existence. This ensures business continuity even in the event of changes in ownership.

• Copy of PAN CARD: Mandatory for directors and shareholders.
• Passport Size Photographs: Required for directors and shareholders.
• Nationality Proof: Mandatory for foreign national directors, if applicable.
• Company Details: Share capital amounts, shareholding ratio, brief company description, and registered office location are necessary. Note: For a Private Limited Company, a registered office address is mandatory.
• Copy of Voter ID Card/Aadhaar Cards and Address Proof: Required for directors and shareholders.
• Contact Details: Electricity bill, telephone/mobile bill, email, etc., for directors and shareholders.
• Memorandum of Association (MOA) and Articles of Association (AOA) Sheet: Essential documents.
• Address Proof of Business Space: If owned, provide address proof; if rented, include rental agreement and Landlord NOC.
• Latest Electricity/Water Bills of Business Space: Required for verification.
• NOC of Shareholder: If the original MOA is amended with their involvement.

• DIN for 2 Directors: Obtain Director Identification Numbers for two directors.
• DSC for 2 Directors: Provide Digital Signature Certificates for two directors.
• Name Search and Approval: Assist in selecting and approving the company name.
• MOA/AOA and Issue of Incorporation Certificate: Draft and file the Memorandum of Association (MOA) and Articles of Association (AOA), and issue the Incorporation Certificate.
• Government Fees and Stamp Duty up to INR 11500: Cover government fees and stamp duty costs up to INR 11,500.
• Free Accounting Software and GST Filing: Provide complimentary accounting software and assist with GST filing.
• PAN and TAN: Obtain Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).

A Private Limited Company operates as a separate legal entity, enabling access to credits, bank loans, limited liability, legal protection for the business, and access to markets. These benefits are provided under the provisions of the Private Limited Company structure in India.

Unlike a Sole Proprietorship, which lacks legal recognition and status, the use of a legal name and status adds value to the entity.

Additionally, the provision of limited liability ensures that the owner's personal wealth and assets remain unaffected, with liability restricted to the extent of company shares.