Private Limited Company in India: An Overview
In India, a private limited company is one of the most popular forms of business entities. A private limited company is a separate legal entity, which means that it can enter into contracts, sue or be sued, own property, and borrow money in its own name. It is formed by a minimum of two and a maximum of 200 shareholders, and the liability of the shareholders is limited to the amount of their share capital.
Requirements for Private Limited Company Registration in India
The following are the requirements for private limited company India
- Directors: A private limited company must have a minimum of two directors, and at least one of them must be a resident of India. The maximum number of directors that a private limited company can have is 15.
- Shareholders: A private limited company must have a minimum of two shareholders, and a maximum of 200 shareholders.
- Capital: There is no minimum capital requirement for registering a private limited company in India. However, the company must have a minimum of one share capital.
- Name: The name of the company must be unique, and it must not be similar to any existing company or trademark.
- Registered Office: The company must have a registered office in India, which can be a residential or commercial address.
Advantages of Private Limited Company
- Limited Liability: The liability of the shareholders in a private limited company is limited to the amount of their share capital, which means that their personal assets are protected in case the company incurs any losses or debts.
- Separate Legal Entity: A private limited company is a separate legal entity, which means that it can enter into contracts, own property, and sue or be sued in its own name.
- Perpetual Existence: A private limited company has perpetual existence, which means that it continues to exist even if the shareholders or directors change.
- Easy to Raise Funds: A private limited company can easily raise funds through the issuance of shares or debentures.
- Credibility: A private limited company is considered to be more credible than other forms of business entities, such as sole proprietorship or partnership.
Disadvantages of Private Limited Company
- Compliance: A private limited company is required to comply with various legal and regulatory requirements, such as filing annual returns, conducting annual general meetings, maintaining proper books of accounts, etc.
- Restrictions on Transfer of Shares: The shares of a private limited company cannot be freely traded or transferred, which means that the shareholders cannot sell their shares without the consent of other shareholders.
- Costly: The cost of setting up and maintaining a private limited company is higher than other forms of business entities.
In conclusion, a private limited company is a popular form of business entity in India. It offers limited liability to the shareholders, has perpetual existence, and can easily raise funds. However, it is also subject to various legal and regulatory requirements and has restrictions on the transfer of shares. Before starting a private limited company, it is important to carefully consider the advantages and disadvantages and consult with a legal professional.