PRIVATE LIMITED COMPANY

What is a Private Limited Company?

A Private Limited Company (Pvt Ltd) in India is a popular business structure that combines the advantages of limited liability with the flexibility of private ownership. It is governed by the Companies Act, 2013, and is a distinct legal entity separate from its owners. This structure is ideal for small to medium-sized businesses seeking to protect their personal assets while benefiting from a formal business framework.

Illustration

Private Limited Company

Two DIN

Two DSC

Name Approval Application

Drafting MOA & AOA

Incorporation Certificate

PAN

TAN

Get Started ₹ 14,999/-(All Inclusive)

Features of Private Limited Company

  • ● Limited Liability: Shareholders of a private limited company enjoy limited liability. Their personal assets are protected from business liabilities, as their liability is limited to the amount unpaid on their shares.● Separate Legal Entity: A private limited company is a separate legal entity with its own legal identity. It can own property, enter into contracts, and be involved in legal proceedings independently of its shareholders.● Ownership and Shares: Ownership of a private limited company is divided among shareholders who hold shares in the company. Shares are not publicly traded and are transferred only with the approval of existing shareholders.● Corporate Structure: A private limited company has a defined corporate structure with shareholders, directors, and a company secretary (if applicable). This structure facilitates formal management and operational processes.● Continuity of Existence: The company continues to exist independently of changes in ownership or management. It has perpetual succession, ensuring business continuity even if shareholders or directors change.

  • ● Tax Rate: Private limited companies are taxed as separate legal entities. The corporate tax rate is 30% on profits, with an additional surcharge & health and education cess as per current tax laws. Small companies with turnover up to INR 400 crore benefit from a reduced tax rate of 25%.● Income Tax Filing: Private limited companies must file their income tax returns annually using Form ITR-6. They are required to maintain accurate books of accounts and get them audited if the turnover exceeds INR 1 crore.● Goods and Services Tax (GST): Companies with an annual turnover exceeding the GST registration threshold (INR 40 lakhs for most states, INR 20 lakhs for special category states) must obtain GST registration and comply with GST filing requirements.● Tax Deductibility: Companies can claim various business expenses as tax-deductible, including salaries, rent, utilities, and depreciation. Proper documentation is required to substantiate all deductions

  • ● Obtain Digital Signature Certificates (DSC): Directors and the company secretary (if applicable) must obtain digital signature certificates, which are necessary for filing documents electronically.● Apply for Director Identification Number (DIN): Each director must apply for a Director Identification Number from the Ministry of Corporate Affairs (MCA). This unique number is required for managing company affairs.● Choose a Company Name: Select a unique name for your company and ensure it complies with MCA naming guidelines. The name should be distinct and not resemble any existing company or trademark.● Draft the Memorandum and Articles of Association: Prepare the Memorandum of Association (MOA) and Articles of Association (AOA), which outline the company’s objectives, governance structure, and internal regulations.● File Incorporation Documents: Submit the incorporation documents to the Registrar of Companies (RoC) through the MCA portal. This includes the MOA, AOA, DIN, DSC, and other necessary documents.● Obtain Certificate of Incorporation: Upon processing your application, the RoC will issue a Certificate of Incorporation, confirming the establishment of your company.● Open a Bank Account: Open a company bank account using the Certificate of Incorporation, MOA, AOA, and PAN card.

  • ● Annual Filing: Private limited companies must file annual returns (Form MGT-7) and financial statements (Form AOC-4) with the RoC. These filings should be completed within prescribed deadlines to avoid penalties.● Maintain Books of Accounts: Companies are required to maintain accurate books of accounts and records. These records must be audited annually if the turnover exceeds INR 1 crore.● File Income Tax Returns: Companies must file their income tax returns annually and ensure timely payment of any advance tax. Non-compliance with tax regulations can result in penalties and interest.● Compliance with GST: If registered for GST, companies must file GST returns periodically and adhere to GST compliance requirements, including maintaining detailed records of all transactions.● Hold Board Meetings and Annual General Meetings (AGMs): Private limited companies are required to hold board meetings and AGMs regularly. The minutes of these meetings must be documented and filed with the RoC.● Update Information: Any changes in the company’s registered office, directors, or other significant details must be updated with the RoC to ensure accurate records.● Secretarial Compliance: Maintain compliance with the Companies Act, 2013, including statutory registers and filings. Appointing a company secretary may be mandatory depending on the company’s size and structure.

  • A private limited company is well-suited for businesses seeking limited liability protection, a formal corporate structure, and the ability to raise capital through private investments. It is ideal for startups, growing enterprises, and businesses looking to establish credibility and enhance operational efficiency.
    Before establishing a private limited company, consult with legal and financial professionals to ensure it meets your business needs and complies with all regulatory requirements.
    Understanding the fundamentals of a private limited company, including taxation, registration, and ongoing compliance, will help you build a solid and compliant business foundation in India.

COMPARISONS 

 

Particulars

Sole Proprietorship

Partnership Firm

LLP

OPC (One Person Company)

Private Limited Company

Public Limited Company

Minimum No. of Persons

1

2

2

1

2

7

Minimum Shareholders

1

Not Applicable

Not Applicable

1

2

7

Separate Legal Entity

❌ No

❌ No

✅ Yes

✅ Yes

✅ Yes

✅ Yes

Limited Liability

❌ Owner personally liable

❌ Partners personally liable

✅ Yes

✅ Yes

✅ Yes

✅ Yes

Perpetual Succession

❌ No

❌ No

✅ Yes

✅ Yes

✅ Yes

✅ Yes

Minimum Capital

No Minimum

No Minimum

No Minimum

Rs.1

Rs.1

Rs.5 Lakhs (for listing)

Legal Registration

❌ Not Mandatory

Optional

✅ Mandatory (MCA)

✅ Mandatory (MCA)

✅ Mandatory (MCA)

✅ Mandatory (MCA + SEBI)

Audit Requirement (FY 2025–26)

✅ If Turnover > Rs.1 Cror > Rs.10 Cr if 95%+ digital

✅ Same as Sole Proprietor

✅ If Turnover > Rs.40Lor Capital > Rs.25L

✅ Mandatory (Companies Act)

✅ Mandatory (Companies Act)

✅ Mandatory + SEBI/statutory/cost audit

Income Tax Rate

Individual slab (up to 30%)

Flat 30% + surcharge/cess

22% + cess

22% + cess

22% + cess

25% (< Rs.400 Cr) or 30% + cess

GST Applicability

✅ If turnover > Rs.20L (services) / Rs.40L (goods)

✅ Same

✅ Same

✅ Same

✅ Same

✅ Same

GST Filing

GSTR-1, GSTR-3B etc.

Same as above

Same as above

Same as above

Same as above

Same as above

Compliance Burden

Very Low

Low

Medium

Medium

High

Very High

Raising Public Funds

❌ Not Allowed

❌ Not Allowed

❌ Not Allowed

❌ Not Allowed

❌ Not Allowed

✅ Allowed (IPO, FPO, Bonds)

Transfer of Ownership

❌ Not Easily Transferable

❌ Difficult

✅ Possible

✅ Possible

✅ Possible

✅ Freely Transferable

Best Suited For

Small individual businesses

Family or friend-run firms

Startups, Professionals, Consultants

Solo entrepreneurs with legal structure

Startups, Funded & Growing Companies

Large corporations and public investors

 

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Taking Care Of Your Business

© Created by Karishma Jain | All rights Reserved

Illustration

Taking Care Of Your Business

© Created by Karishma Jain | All rights Reserved