Starting a business in India is now simpler and quicker than ever before. Tax Zone India, an online business service provider, allows entrepreneurs to register their companies online in less than 10 days at a very affordable price of just Rs. 7899. One of the most common types of legal entities preferred by millions of Indian entrepreneurs and popular startups like Flipkart, PhonePe, and Swiggy is a Private Limited Company (PLC).

This article aims to provide a detailed overview of the incorporation process, requirements, and compliances related to a private limited company in India.

What is a Private Limited Company (PLC)?

A private limited company is a type of legal entity governed by the Companies Act, 2013. It requires a minimum of two directors and two shareholders, with one of the directors being an Indian resident and citizen. The Indian government encourages foreign direct investment in India, and most foreign subsidiaries establish themselves as private limited companies. In most sectors, 100% foreign direct ownership (FDI) is permitted, and there are no restrictions on foreign shareholding in a private limited company.

Documents Required for Company Registration:

The proposed directors of a private limited company must present proof of identification and address to register a company. Indian nationals must provide their PAN card, while foreign nationals must provide their passport. Directors must also provide proof of address, such as a passport, driver’s license, election ID, ration card, Aadhar ID for Indian nationals, and driver’s license, bank statement, or residence card for foreign nationals. Additionally, they must produce a document generated within the last two months as proof of residency, such as a bank statement, electricity bill, or phone bill.

If one of the company’s shareholders is a company based in India or abroad, the following documents must be submitted:

1. Board resolution authorizing investment in the company
2. Incorporation Certificate of the Company
3. Address proof of the company

Capital Required to Start a Company

A company can be started in India with a minimal amount of capital. There is no fixed amount, and the shareholders can determine the capital they wish to contribute. While setting up the capital structure of the company, the following concepts must be kept in mind:

1. Face Value of Share: The face value of a share is the price per share with which the company is incorporated. The face value of shares is typically Rs. 1 or Rs. 10 or Rs. 100 or Rs. 1000 or Rs. 10,000.
2. Authorized Capital: The authorized capital is the total value of shares a company can issue to shareholders. Normally, all companies are incorporated with an authorized capital of Rs. 1 lakh or Rs. 10 lakhs. If a higher authorized capital is required, the company would be required to pay additional fees to the Ministry of Corporate Affairs. The authorized capital of a company can be increased at any time after incorporation.
3. Paid-up Capital: The paid-up capital is the number of shares issued to shareholders for which they have paid or deposited money to the company. The paid-up capital of a company cannot be more than the authorized share capital of the company.

Company Registration Process

The following are the steps involved in registering a company in India:

Name Approval:

An application for company name approval is submitted to the Ministry of Corporate Affairs to reserve the company name.

Digital Signature:

All signatures for filings with the MCA must be completed with a digital signature that is issued by a Certification Authority in India.

Incorporation Application Submission:

Once the digital signatures are obtained, the incorporation application can be filed in SPICe Form to the MCA with all relevant attachments. If the MCA finds the incorporation application to be complete and acceptable, the Incorporation Certificate is granted.