How to Register a Private Limited Company

What is a Private Limited Company?

A private limited company is a privately held business entity held by private stakeholders. The liability arrangement, in this case, is that of a limited partnership, wherein the liability of a shareholder extends only up to the number of shares held by them.

With the startup ecosystem booming across the country and more and more people looking to do something on their own, there is a need to be well-acquainted with different business registration types i.e sole proprietorship, limited liability company, and private limited company.

In legal terms, Section 2 (68) of the Companies Act, 2013 defines a private company as:

“A Company having a minimum paid-up share capital as may be prescribed, and which by its articles,— (i) restricts the right to transfer its shares; (ii) except in case of One Person Company, limits the number of its members to two hundred; (iii) prohibits any invitation to the public to subscribe for any securities of the company.”

In this article, we will talk about different sides of a private limited company.

Private companies have the upper hand over public companies with respect to investment in long-term strategies, keeping the values of their shares and financial figures discreet, freedom, and flexibility of operations.

Characteristics of a Private Limited Company

Now that you know what a private limited company is, the next step is to know the characteristics of such a company:

Membership: Like any other company, a minimum of two shareholders are required in order to start such a company. But since it remains a small entity, there is also a maximum cap on the number of members fixed at 200. There is also a requirement of two directors to run the company
Limited liability structure: In a private limited company, the liability of each member or shareholder is limited. Therefore, even in the case of loss under any circumstances, the shareholders are liable to sell their own assets for repayment. However, the personal and individual assets of the shareholders are not at risk
Separate legal entity: This is a separate legal entity and continues in perpetual succession. This means that even if all the members die, or the company becomes insolvent or bankrupt, the company still exists in the eyes of the law. The life of the company will be perpetual, not affected by the lives of its shareholders or members unless dissolved by way of resolution
Minimum paid-up capital: A private limited company requires to have and maintain a minimum paid-up capital of Rs. 1 lakh. It could go higher, as prescribed by MCA from time to time

Also read All You Need To Know About Limited Liability Proprietorship