A privately-held corporate entity is most of the times referred to as a private limited company. Private stockholders are simply in charge of the company’s management. A private company’s liability arrangement is somewhat similar to that of a limited partnership wherein a shareholder’s liability is equal to the number of shares that are held by them. With fresh firms springing up all over the country, it is critical to understand the diverse business structures, like sole proprietorship, limited liability, and even private limited company. Of course, you have to do private limited company registration before you venture into this thing.
Private Limited Company explained
A Private Limited Company is a kind of business that is owned and even operated by a tiny group of people. Private stakeholders are in charge of such kind of entities. A Pvt. Ltd. Company’s liability arrangement is somewhat less severe than that of any LLP or a sole proprietorship, that puts firm assets at risk in the time of a financial crisis. Although all partners in a Pvt. Ltd. Corporation are somewhat responsible for the company’s loss, there is one exception. Shareholders can get subjected to such types of losses up to the number of shares that are held by them. It simply means that a member’s liability for recouping a specific business loss is restricted to the number of shares they possess.
The features of private limited company
There are different unique features of a private limited company and a few of them are as under:
Limited Liability Structure
Every single member or shareholder’s responsibility is limited in a private limited corporation. As an outcome, even in the time of a loss, the shareholders are indebted to sell their own assets to content the debt. The shareholders’ personal as well as individual assets, on the other side , are not at all in danger.
Separate Legal Entity
It is a kind of separate legal entity that will exist in perpetuity. This means that the corporation is going to continue to exist in the eyes of the law even if all of the members die or even the company becomes insolvent or bankrupt. Unless ended by resolution, the company’s life is going to be eternal, unaffected by the lives of its shareholders or even members.
Least Paid-Up Capital
A minimum or least paid-up capital of INR 1 lakh is needed for a private limited company. It might go even higher, as MCA may recommend from time to time.
To establish or form up a firm, you will need as a minimum of two shareholders, just like any other business. However, since it is still a tiny organization, the utmost number of members is capped at two hundred. A minimum of two directors is needed to govern the business.
Private limited companies need the following type of documents to set up:
Memorandum of association
It speaks of the purpose of setting up a business, the nature of business, the even objective of a company and the capital clause. It is a corporate type of document that is even known as a charter of the company and defines a company’s bonds with shareholders and specifies the goals of the company.
Article of association
This is the document that speaks of the internal operating system of the company. It explains the overall managing process, duties and responsibilities of each member, dividend policy, even shareholder meetings and appointment of directors.
Certificate of incorporation
It is the certificate or even license that the directors receive after submitting all different required documents for registration. It is the main document of authentication of the company and the Registrar of Companies(ROC) issues this type of document in India.
Other documents encompass ID proof (PAN card, even Aadhaar card), address proof (ration card, even voter id), rental agreement, NOC from the property owner and even a copy of the sale deed for the owned property for all directors and even shareholders of the company.
Types of private limited companies you should know about
Following are some different types of private limited companies:
Private limited company by the shares
A private company limited by shares is simply limited in capital that is based on the numbers of shareholders who are payable money on their shares. For such types of companies, the liability of shareholders is somewhat restricted by the MOA (memorandum of Association) to the number of their overall shares or the amount that stays unpaid. The shareholders are not at all liable to pay more than their share capital that is invested in the company.
Private limited company by the guarantee
In the realm of a private limited company limited by guarantee, the liability of the individual shareholder is somewhat limited to the sum he guarantees in the MOA. Therefore, they can be accountable only up to the sum that they have guaranteed. In addition, they may appeal this guarantee only in case the company is permanently shut down.
An unlimited company is a separate type of legal entity. Unlimited corporations are simple businesses that have no sort of restrictions on the liability of their members. The liability of every member may extend over the entire company’s debts. It simply means members’ personal assets can pay off debts that are incurred by the company.
Can anyone setup and run a private limited company?
A private limited company can have a least of two directors and even a maximum of fifteen directors. In addition, at least two shareholders may have a legal distribution of shares of a private limited company. A complete number of two hundred shareholders is going to be acceptable.
Similarly, you should also know that it requires as a minimum of two directors to manage a private type of limited company. They can be shareholders of the company. As per the Section 2 (clause 68) of The Companies Act, 2013, any sort of private limited company can have paid-up capital of 1 lakh rupees minimum or even higher, which is stated by the government.
TO sum up, you can have your own india private limited company once you have all the documents with you and you get it registered.