Private Limited Companies in India: A Comprehensive Guide

A private limited company can only have a limited number of shareholders and is legally constituted with limited liability or legal protection for them.

Private limited companies are a type of privately held company for small enterprises. A Private Limited Company's members are only liable for the number of shares they each own. Private Limited Company shares cannot be exchanged publicly.

A private limited company's shareholders are the people who possess shares in the company. An whole company may be owned by one individual, who may then have total authority over all business-related decisions. The amount of shares that each shareholder owns determines how many votes they each have if there are several owners. Company law defines "persons of significant interest" as those who have the ability to significantly influence business decisions and control more than 25% of the shares as such. Minimum requirements:

1 Two or more directors who are at least 18 years old.

2 A private limited company requires that at least one of its directors be both an Indian citizen and resident.

3 Additionally, a firm must have two shareholders.

4 Natural people or artificial legal entities can be Shareholders.

Advantages:

A well-known corporate structure that offers its shareholders various benefits is the private limited company (PLC). The following are some benefits of a private limited company:

Limited Liability, Separate Legal Entity, Continuity of Business, Better access of capital, Credibility, Tax Benefits, Limited compliance requirements, Control over ownership.

Disadvantages:

Private limited corporations have significant drawbacks in addition to their many benefits. The following are some of a private limited company's key drawbacks:

Limited access to capital, Legal compliance requirements, Limited ability to transfer ownership, Greater liability for directors, Difficulty in attracting talent, Lack of transparency.

 

Avoid these common errors while registering a private limited company in India:

1 Not researching the company name:

2 Not having the necessary documents:

3 Not choosing the right business structure:

4 Not understanding the legal requirements:

5 Not having a clear business plan:

6 Not seeking professional help:

 

Conclusion: From the above article we see to sum up, setting up a private limited company in India might be difficult, but avoiding these typical blunders will make the procedure go more smoothly and guarantee that your application will be approved. We can ultimately save time, money, and frustration by taking the time to learn about and comprehend the legal requirements and by getting professional assistance.

The above article has been written by Mr. Omkar Bandivdekar (CMA Aspirant) and reviewed by Mr. Suyash Tripathi (Chartered Accountant) and they can be reached at mdomkarnitinbandivdekar@gmail.com and tripathi.r.suyash@gmail.com .