Prerequisites to register a Private Limited Company in India

Before starting a new business, you need to understand the basic requirements for the business structure. The structure technically decides many factors including the operations, controls and ownership rights. If after the structure assessment, you find the Private Company as aright entity for your business, it’s time to dig in deeper. Let’s find an answer to what are the basic requirements for Private Limited Company Registration in India?

 

Decide objects and scope

The first step is to consider the business activities and scale of business. Based on this factor, you can decide the business and financial needs. To mention the regulation, note that your business activity is not something prohibited or announced as illegal. Further, few activities are regulated by different regulatory like SEBI, RBI or IRDA. For example, if it is a financial institution, you need to obtain RBI approval. SEBI approval is required for activities related to the securities market like a stockbroker.

 

Company’s business activities are termed as objects of the company by law. Such objects are identified in the MoA of the company. The object clause of MoA should refer to the main activities and other activities ancillary thereto. Unless you have registered the object with MCA through MoA, the company cannot indulge in such activities. Therefore, you should try to cover the most general clauses related to any activity to reduce the chances of alteration and incur a cost. However, multiple unrelated activities are not allowed under one roof.

 

Your activity and scope will further decide other licencing requirements. For example, import-export business demands IEC registration, while many other activities meet mandatory registration requirements under GST.

 

Choose where you work

After your business activity is decided, you need to find a business place. The business place must be provided for company registration. The promoters must provide the business address and related documents for the purpose of registration.

 

Typically, it is used for the business communication by authorities including MCA or any third party. However, this becomes less significant in the era of digital communication, especially for small businesses as it incurs fixed and continuous expenses for the company.

 

Here, I would like to address the most frequently asked questions: Can I register a company at a residential address? This is most raised concern for the small-scale businesses or those who do not have a specific business place. You need to address the registered office requirement whether you own a business place or not. Therefore, you can register a Pvt Ltd company even at a residential place. However, you should also look for its pros and cons. Also, virtual office option is open for you.

 

If you find that you do not want to use given address for long-term, need not to worry. You can change the address anytime.

 

Choose who you work with

Business partners are essential to direct the business in the right and targeted direction. Here, in a company structure, you get to choose with whom you want to share your ownership or the work. In a company, the ownership and management is separate.

 

You specifically need to address the business needs by placing the right person for the appropriate task. In most cases, the Private Company owners choose to become member and director at the same time. However, you can surely adopt the benefit of separation, whenever needed.

 

Let’s talk about provisional requirements as well. To register a Private Limited Company in India, you need to fulfil the following requirements:

1. Minimum 2 shareholders

2. Minimum 2 members.

Many entrepreneurs find themselves alone to meet this requirement. In such a case, you can rely on a family member or a friend to fulfil the minimum criteria.

 

It is not necessary that all shareholders be an individual. Even body corporate like company or LLP can become shareholder through its representative. On other hands, it is necessary that the company’s directors are individuals. Further, one of the directors must be an Indian resident.

 

Choose your company name

The company name is how you are known in the market. It is necessary to choose the right name that depicts your goals and objects. Additionally, it should be easy to pronounce and remember for the purpose of advertising.

 

You should not rely on adopting existing businesses’ name, because in the long-term that may harm your business as well. Especially in this competitive environment, the business needs to place itself distinct from others in existence.

 

Note that your company name must end with “Private Limited” or “Pvt Ltd”. This provisional requirement meets the need to depict the nature of the business. Make sure to meet the other regulatory requirement in name reservation. Also, you must take views of professionals before finalising the name.

 

Decide initial capital inflow

Last but not least – money. Money keeps the business going, but it’s the most essential factor to start one. When you are reaching the promotion stage after deciding all the above factors, you come to finalise the initial capital requirement for the company.

 

While you are the best judge to decide your business requirements, let have a look on regulations you must be aware of. For company registration, you will come across many different terms representing the types of capital. The main being- authorise capital and paid-up capital.

 

Authorised capital is one that decides the company’s capacity to raise money. The primary requirement is to set the company’s authorised capital as Rs 1 Lakh. While deciding this amount, you need to consider that it is a deciding factor for the stamp duty payable to Government for registration.

 

You are free to decide the paid-up capital. Note that to become a shareholder, one must subscribe at least 1 share. This is the capital actually to be deposited in the company’s bank account. Therefore, decide this amount being realistic and understanding the actual need of the company. Again, you can anytime raise additional fund for the company with the prescribed process.

 

Conclusion

The process to register a Private Company is simplified with minimal requirements. But, your burden reduces when you find the right professional to your assistance. However, it is essential on your part to know these basic requirements and inform your needs to them. With LegalWiz.in, you find the business set-up hassle-free and at the affordable cost. With a 9.6/10 referral score, the team has served more than 4,000 businesses across the country. Get in touch with LW professionals at support@legalwiz.in to take your Company registration plan to the next stage.

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Comment by Shikha Singh on March 30, 2020 at 10:17am

Thank you for sharing this informative Blog. If you are looking for Online Company Incorporation in India. To know more click on: https://www.caonweb.com/company-registration.php

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