August 10, 2022

Advantages of Registering a Private Limited Company in India

company registration

One of the most important steps that every business person needs to consider is registering their company if they seek to enjoy new opportunities and competitive advantage. In addition to making your venture influential, company registration also helps you obtain tax exemptions, government tenders, and many more. India’s registered companies under the Companies Act 2013 are rapidly overtaking traditional businesses due to their many advantages. Read below to find them.  

What is a Private Limited Company?

A private limited company can be referred to as a commercial venture that is held privately by a person or a group of members. The members of a company share liability according to the shares or contractual agreement signed by them. The shares of such a company cannot be traded publicly nor they can be listed on the stock exchange of India.

Advantages of Private Limited Companies

Sense of ownership

Public limited companies have to follow various regulatory conditions and share ownership can be sold or bought publicly. A Private Limited company, on the other side, can be transferred or sold only after consulting with the board members. The shares of the company are possessed by the owners or business founders themselves other than private investors. Therefore, less confusion and complication are expected in management decision-making.

Legal Formalities and information disclosure

Public companies are responsible to serve larger society as there are shareholders who need to be informed every now and then about company affairs. This certainly makes all the proceedings complicated and involves legal formalities. However, private companies comparatively have lesser formalities and rules which makes them simple to manage. Moreover, you do not have to disclose company matters in public as private companies are not subject to any such compulsion.

Company management

In public corporations, management and decision-making get highly difficult and confusing as more stakeholders are involved. Because the number of stockholders in a private corporation is less, this complicated approach is avoided. Public company executives are focused on boosting the value of their stock, whilst private corporate leaders are more flexible in both immediate and long-term business choices.

Managing stock market

Unlike public limited companies that have been listed on the stock exchange, private companies do not have to bear the pressure created by stock markets’ ups and downs. Their management is not interfered with by shareholders’ expectations or market conditions. This means that if you own a private limited company, all you need to focus on is profiteering and other important matters that can make your business sustainable.

Confidential matters are secured

In private limited companies, all the information remains secure whether it is related to stock, legalities or executive compensation. It cannot be deemed appropriate to share your business data with your competitors which is the reason many companies prefer keeping their company private unless they are required to make it public limited.

What do you need to apply for registering as a Private Limited Company?

Members

A private limited company can be started with a minimum number of two members and a maximum of 200 members. All the company shareholders have to get their names registered according to the Companies Act 2013.

Directors

A private company must have a minimum of two directors to get themselves registered as a Private Limited Company. Every director must have a separate DIN or Director Identification Number provided by the ministry of corporate affairs. When registering in India, at least one director must be a citizen of India and must have stayed in the country for not less than 182 days in a year before registration.

Name

The name of your company must be kept appropriately and have the words ‘private limited company’ in it. Your company name must use the private limited company in the end before sending it for approval to the Registrar of the Companies (ROC). The name should be unique as it is going to stay with the firm through its lifetime.   

Registered office address

When you get your company registered, you may provide a temporary address for the company until registration. Nevertheless, a permanent address of your company’s registered office must be provided to the ROC upon registration. The company’s registered office is the place where all the documents are kept and major affairs of the company take place.

Digital Signature Certificate and Professional Certificate

Obtaining a DSC is a comparatively new condition that needs to be met owing to the digitized business environment. Documents must be submitted online for a DSC. Once approved, digital signatures can be used by every director for filing documents. Similarly, obtaining a professional certificate verifies a professional’s role in the company such as charted accountant, company secretary and so on.

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