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Top 10 Facts about the Private Limited Company Registration in India

Top 10 Facts about the Private Limited Company Registration in India

by CA Jai Kumar Shah, October 13, 2021

A private limited company that does not trade its shares on the stock exchange. However, the stakes are transferable between the members with the permission of the directors. Your company will get tax exemptions if it is an approved startup. Hence it is a popular choice for new startups and family businesses.

A private limited company registration process is complex and requires technical assistance. You have to keep in mind the different legal formalities, rules, regulations of the Indian Companies Act, and various documents. Here are ten facts that you must understand before the registration of private limited company:

The Shareholders

You need a minimum of two shareholders to form a private limited company. You may extend the number of shareholders to a maximum of 50 people. They need to invest a minimum of 1 lakh rupees in starting the company. They cannot register their shares with any recognised stock exchange. But their stakes are transferable among themselves without selling them to the public.

Disclosing Company’s Information

Private limited company registration does not require you to disclose any sensitive information. Unlike a public limited company, a private limited company does not need to raise public investment from the market. Therefore, they do not need to abide by any such compulsion.

Ownership Procedure

Private limited companies are established, managed, and owned by private investors. The company shares belong to private investors and are non-sellable in the open market. So, the number of shareholders is limited, making the management a less complex process.

The private limited company registration process is different from a public limited company. The reason is that the ownership of a public limited company is in the hands of shareholders, the general public.

Legal Process

The private limited company registration process requires a short list of legal formalities. If you are thinking of starting a private limited company, you do not have to undergo hardships. The process is less expensive and does not take up a lot of time.

The Pressures of Stock Market

For new private limited company registration, you can be sure that you do not need to succumb to the stock market pressures. The prime reason is that the shareholders have no expectations from the company to increase the price of the shares. If the company is working in legal accordance, they will face no interference from the shareholders.

Maintaining Confidentiality

For a private limited company, you do not need to share any internal secrets or tactics. You may choose not to disclose legal procedures, the expansion policies, and the remunerations of executives. Unlike a public limited company, a private limited company can maintain a high level of security. Therefore, it protects you from your competitors who might benefit unnecessarily from sensitive information.

 Popular Choice for Startups

The structure of a private limited company is stable and offers greater growth opportunities. It also ensures an individual existence, an identity that is different from the members. Therefore, if there are any changes in the members of the management, it will not affect the company’s position.

There is also a board of members or board of directors that facilitate the members’ interest. The board will get proper remuneration, while there is profit distribution among the member through dividends.

New private limited company registration allows multiple funding options like ESOP, private equity. Therefore, you will be able to get external funding, external funding agencies, banks, and others. The prime reason for such eagerness is the reliance on the corporate structure.

The Name Is Crucial

The registration process is incomplete without an excellent name for the company. The registered address and name are in readable letters outside the place of business. Every company chooses a unique name and needs to check for availability. It is preferable if the name reflects the business type or is reminiscent of the name of the owner.

Focus on Long Term Earnings

A public limited company needs to worry about the value and price of the shares. Therefore, there is an in-built pressure to focus on short-term earnings to improve the share value. But, since a private limited company does not need to worry about share value, they can be free from such pressures. They only need to focus on long-term goals and plan likewise.

The Management 

In public limited companies, there are more shareholders; hence the decision-making process is complex. Such complications do not exist in private limited companies. Moreover, with fewer short-term goals, the management can focus on long-term goals and benefits. Thereby it increases their understanding of the company.

To Sum It Up

Registration of a private limited company is easy with SetMyCompany. They have an online registration process that can be useful together with their expert guidance. Choose wisely for a great experience.

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