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What Are The Steps To Set Up a Private Limited Company?

When you start a business, you should also choose the right company structure for your business that will enable business-related activity. This right structure will enable business growth and therefore bring in more revenue. While we will talk about setting up a private limited company in this blog, it’s vital that we first understand the different types of businesses in the country.

  • One person company or sole proprietorship: This is the best way to register a company if you are the sole owner and member
  • Limited Liability Partnership (LLP): In an LLP, the liabilities are limited only to the agreed contribution
  • Private company: A company that has shareholders and directors, besides founders is considered a private limited company. Each individual is a company employee
  • Public limited company: Public limited companies are voluntary associations of members that are incorporated under company law. 

How to Register a Private Limited Company

If you’re setting up a private limited company, you need to follow the following steps 

  • Obtain a unique digital signature certificate
  • Procure the director identification number
  • Reserve a company name
  • Obtain the company formation certificate 

Obtain a digital signature certificate

To set up a private limited company, you first need to obtain a unique digital signature certificate for yourself. The company board or the managing director is required to have this certificate, as it is required while filing e-forms and submitting I-T returns.

This certificate is issued by a certifying authority, and is valid for 1-2 years before it is renewed. People who serve as shareholders, as well as company directors must obtain the digital signature certificate.  

To get a digital signature certificate, the following things need to be submitted

  • Applicants passport-sized photo
  • Self-attested copies of the applicants address proof 
  • Self-attested PAN card

Procure the director identification number

The Director Identification Number, popularly known as DIN, is a unique identification number assigned to Directors of companies by the Ministry of Corporate Affairs. The number is valid for life, unless withdrawn, surrendered, or removed by the MCA. 

Company directors are required to procure unique DINs to register a company. DINs also come to use when a director is appointed to another company or takes charge as the Designated Partner of an LLP.

Documents required for DIN:

  • Applicant’s passport size photo
  • Self-attested copies of the applicant’s Address proof
  • Applicant’s self-attested PAN card

Reserve a Name for the Company:

Before incorporating a company, it requires a unique name. To do so, the Directors must submit an application asking to reserve a particular name for the Private Limited Company via e-Form INC – 1. The Directors must ensure that the appropriate form is filled and that the required processing fees have been paid. One single application can contain a maximum of 6 different names, ranked in order of their preference along with why the name is a good fit for the company. Government officials will then check the availability of each name and then approve or reject the application accordingly. Furthermore, most Directors hire professionals to check the availability beforehand, to avoid any confusion later on. It is up to the Registrar of Companies to decide whether to approve or reject the application.

General Guidelines for Choosing a Name for the Private Limited Company:

  1. The name must be easy to remember, as well as spell
  2. It should provide the company with a unique identity
  3. The name must be short, simple, and creative
  4. Name must not contain within it any words which are derogatory or deemed unparliamentary
  5. It must not contain words which are offensive and prohibited
  6. It must not infringe any legal Trademarks registered earlier
  7. The name cannot be similar or identical to any other company’s names

If approved, the RoC reserves the name for 60 days, within which the company must apply for incorporation. If the company fails to do so, the name shall lapse and the entire process will have to be repeated, for the company to file its incorporation.

Obtain the Certificate of Incorporation:

Once an appropriate name is reserved, the Company must apply for incorporation. Furthermore, it must also file an online application for registration of a private limited company.

Also, the officials must draft a Memorandum of Association and Articles of Association for the Private Limited Company. The MoA describes the company’s scope of operations, lists out its objectives, and also names its activities. On the other hand, the Articles of Association  describes the nature of operations of the company and explains how its administration will carry out its responsibilities. Both of these documents must be listed in the SPICe forms after being authenticated via affixing DSCs. If the RoC is satisfied with the application, he or she will approve the application and the company will receive a Certificate of Incorporation, which contains the PAN of the newly formed company.

Also read: company registration process

Supporting Documents to Register a Private Limited Company

  • NOC from the owner of the office premises if it is rented or leased
  • Utility bill from the office space
  • Copy of the lease agreement/rental agreement/property certificate
  • Form DIR-2 showing Director’s consent
  • Affidavit of first shareholders and directors via INC-9
  • Self-attested proof of identity of the first directors and subscribers

Once a company receives the Certificate of Incorporation, it becomes a legal entity and can start functioning as a Private Limited Company within India. Therefore, from then on, the directors, administrators, and promoters can commence their operations. Furthermore, the company must deposit the share capital as listed in the company’s account as soon as possible. The CoI and other details about the company’s creation will be listed on the MCA website.

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