Company Registration

Private Companies are a small business entity which can be incorporated with a minimum of two shareholders and directors. Each is regarded as the employee of the Company with the benefit of limited liability.

Any individual/organization can become the member of Private Limited Company. Even Foreigners and NRI and foreign entities can become member of Private Limited.

Yes, NRI/Foreign nationals can become directors in Private Limited company. They must get a DIN from Indian ROC. Also, they can be a majority shareholders in the company.However, at least one director on the board of directors must be an Indian Resident.

“Company” means a company incorporated under Companies Act 2013 or any previous company law.

The advantages of Private Limited Company are as following- ? Separate identity A private limited company is considered to be a separate legal entity. It has its own identity and very much recognised as a separate company under the law. Also, the company can own property due to this feature under its name. The company can sue and also it can be sued under its own name due to this very same feature. ? Limited Liability Private Limited Company has this feature of limited financial liability of all the shareholders. The liabilities are limited to their shares only. This feature protects the personal assets and income of shareholders at times of any financial crisis faced by the company. Also, it gives the company more liberty of taking risks. ? Ease of Raising Fund Shareholders allowed are up to two hundred and another two hundred members are allowed, this many numbers and the reputation of the private limited company makes it easier to raise capital funds in comparison to other forms of companies. Therefore, we can say the scope of expansion is greater when a private limited company is incorporated. Taking debts from banks and other financial ventures are quite easy too. ? Long and continuity of Existence Private Limited companies are not affected by the status of their own when it comes to their existence. Death or inability to continue if the owner does not hinder the proceedings of the company. ? Tax Advantages They pay tax on taxable profits and are exempted from higher personal income tax rates. ? Minimum requirement of shareholders and members Only two members and two shareholders are required to incorporate a private limited company. This gives many Entrepreneurs an opportunity to set up their own company.

It is a voluntary association of several members with a separate legal entity, and the liability of its members is limited to the shares held by them. Laws, rules and regulations govern all the activities of this form of company. Minimum 7 members required to get registered as Public company.

? Raising capital through public issue of shares ? The most obvious advantage of being a public limited company is the ability to raise share capital, particularly where the company is listed on a recognised exchange. ? Since it can sell its shares to the public and anyone is able to invest their money, the capital that can be raised is typically much larger than a private limited company. ? It’s also possible that having stock listed on an exchange could attract investment from hedge funds, mutual funds and other institutional traders ? More capital ? Selling shares to the public means that anyone can invest in your company, meaning greater options for where to source value funds. ? Potentially, this can raise significant funds if your company is particularly appealing to the public and traders. ? More attention ? Being listed on an exchange ensures that hedge funds, mutual funds, and other traders take note of your business. More interest means more business opportunities for you on top of more capital to be gained. ? It's the ideal way to make your business a more prominent name in your field. ? Spreading risk ? The more people that buy shares in your Public Company , the more the risk is spread out. ? It's also safer than relying on one or two angel investors, as the level of influence is spread out wider amongst your many new shareholders. ? Growth and expansion opportunities ? By having less risk, it's the perfect opportunity for growing and expanding your business - investing into new projects and products, through the money gained via shares. ? Banks are often more willing to extend finance to a public limited company, with a stock exchange listing frequently improving your creditworthiness. ? Prestige ? Having PLC at the end of your company's name adds prestige and grandeur to your business. Future customers, suppliers, and employees will view your business more positively if it has those letters at the end of the name. Even more so if it's also listed on a stock exchange. ? It can even lead to free publicity with the media devoting more attention to such firms.

? Smaller resources A private company cannot have more than fifty members. Its credit standing is lower than that of a public company. Therefore, the f financial and managerial resources of a private company are comparatively limited. ? Lack of transferability of shares There are restrictions on the transfer of shares in a private company. As a result a shareholder cannot leave a private company easily and quickly. ? Restricted Access to Capital Markets Private Limited Companies cannot get its shares listed in any stock exchange through initial public offerings. With this restriction, private limited companies may find it difficult to attract outside investors to buy the shares. ? Increased Legal Compliance & Administration Costs Private limited companies must submit its annual returns, financial statements, Board reports etc to the Registrar of Companies annually. Every private limited must get its accounts audited by a practicing Chartered Accountant, which makes it mandatory to appoint a chartered accountant as auditor of the company; even there is no significant accounting transaction. Further there are many event based compliance requirements too. So in order to meet legal obligations casted on private limited companies by the Companies Act, 2013 and others statues, a company must have a competent professional by its side to advise and help in ensuring statutory compliances, which increases the general and administrative expenses of a business.

? More regulation ? Regulation is far more stringent when you run your company as a PLC. If you want your shares listed, you need to meet strict discourse and filing requirements for the London Stock Exchange, and to keep up to date with such requirements on a regular basis. ? You also need to have at least two company directors, and a company secretary with the relevant professional qualifications. ? High initial financial commitment ? In order to trade, your company must start with at least 5Lakhs of nominal share capital with at least 25% of which is paid up. ? That's much higher than the financial needs of a private company, with further costs potentially coming from legal and investment professionals advising you on your listing process. ? Higher transparency ? Stockholders require regular accounting updates so that they know exactly how their shares are faring. They must be produced within 6 months of the end of the financial year. ? Annual general meetings must also be held, demonstrating your accountability to more people than before. ? Typically, public limited companies are held to account and more thoroughly scrutinised by auditors. ? Vulnerable to takeovers ? It's useful having the risk spread out, but that also means your company is vulnerable to takeovers. This is particularly relevant if a majority of shareholders agree to a takeover bid. ? It's much harder to control who is a shareholder of your company, so there's a possibility of losing control of the direction of your business.