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?

a) Members

Atleast 2 members are required for starting a private limited company and the maximum limit cannot exceed 200 members as per Companies Act 2013.

b) Liability

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

Once the name of the company is decided the following steps are required.

1. Apply for DSC(Digital Signature Certificate) and DIN(Director Identification Number).
2. Apply for the name availability.
3. File the MOA(Memorandum of Association) and AOA(Articles of Association) to register the PLC.
4. Apply for PAN(permanent account number) and TAN(tax deduction account number) of the company.
5. Certificate of incorporation will be issued by RoC with PAN and TAN.
6. 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 PLC 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.

Types of Private Limited Company

There are different types of private limited company some of them are-

• Capital based – A company can be registered with capital as well as without capital. The company which is based on capital is provided in the capital clause of the MOA of the company.
• Liability Based – The liablity of the members can be limited or unlimited.In India companies registered usually are liablity based. In case of companies with shareholding, the liablity of the members is limited to unpaid capital on subscribed shares. Whereas in case of companies without shareholding, the agreed amount of liability in form of capital is provided in MOA of company.
• One Person Company – OPC or one person company is a type of private limited company which is registered with only one shareholder . This type of structure is benefitial to those promoters who don’t want to share their ownership rights/

Why most Startups Prefer Private Limited Company?

Most of the new startups prefer private limited company structure over any other types of structure because of growth opportunities and stability it provides. Also it has separate legal existence of its own apart from its members. So any involvement of legal proceedings and contracts are in its own name.