A private limited company or ltd is a privately held small business entity.Shares of a private limited company cannot be traded publically. Liablity of owners is limited to their shares.
What are the features of private limited company?
Atleast 2 members are required for starting a private limited company and the maximum limit cannot exceed 200 members as per Companies Act 2013.
The liablity of the share holders is limited in a private limited company means in case of financial loss to the company the owners or shareholders don’t have to sell their personal assets.But in case of any fraud the limited liablity protection will be negated.
c) Restriction on Transfer of shares
Shareholders cannot sell or transfer their shares publically.To transfer share to others shareholders need to take consent of other shareholders.
d) Perpetual Succession
Bankruptcy,insolvency or death of any members will not affect the existence of the company.Means that company will keep on existing forever.These companies are created by law and are also dissolved by law.
e) Use of Private limited
The use of private limited or pvt ltd is mandatory for all private companies.
f) Minimum paid up capital
The minimum amount of paid up capital required to start a private limited company is RS 1 lakh.The paid up capital limit is prescribed from time to time.
Procedure to Register a Private Limited Company
Once the name of the company is decided the following steps are required.
- Apply for DSC(Digital Signature Certificate) and DIN(Director Identification Number).
- Apply for the name availability.
- File the MOA(Memorandum of Association) and AOA(Articles of Association) to register the private limited company.
- Apply for PAN(permanent account number) and TAN(tax deduction account number) of the company.
- Certificate of incorporation will be issued by RoC with PAN and TAN.
- Open a current bank account on the company name
What are the advantages of a private company?
a) Separate Legal Entity
An entity is something which has a real existence.The company being juristic person can acquire, own property on its own name.No shareholders can claim upon the property own by the company.
b) Minimum number of shareholders
for a private limited company a minimum number of 2 shareholders are required whereas for a public limited company minimum 7 members are required.
c) Legal Formalities
Private limited companies have less number of legal formalities as compared to public limited companies.
d) Disclosing Information
A public company is required to disclose their financial report every quarter as it will affect public investment.In case of private limited companies no such compulsion is there.