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  1. If you’ve been itching to launch your own business but are still not sure how, read on. Incorporation of a private company in India is the first step towards starting your own business. A private company is a non-public entity that can be owned by its members or shareholders or managers. It is formed by registering it with the Registrar of Companies (RoC) and getting an Certificate of Incorporation. This article will help you understand how to set up a private company in India and what documents you need to incorporate as a Private Company. Private companies have their own pros and cons. In this article, we’ll discuss everything about Private Company Registration in India and why you should consider this as an option for your business. What is a Private Company? A private company, also known as a private limited company or private limited liability company, is a business that is owned by private shareholders and is not listed on a public stock exchange. The term “private company” is a loose term and can be used to refer to a wide range of business types. A private company can be an unincorporated business owned by one person or an incorporated company with shares held by a small number of shareholders. The main difference between a private company and a public company is the degree of public ownership. A public company is owned by the general public and its shares are traded on a stock exchange, while a private company is owned privately. A private company can be owned privately by an individual, a group of individuals or another private company. Advantages of Incorporating a Private Company - Favorable tax structure - Private companies are taxed at a lower rate than public companies. Private companies are taxed at a 30% flat rate, which is lower than the normal corporate tax rate of 33.99% for public companies and companies with a profit of up to INR 100 cr. - Easier access to debt - Private companies have an easier time accessing debt financing than public companies because of the less strict collateral requirements. Private companies use shareholder’s equity instead of debt to fund the business. - Less strict auditing requirements - Private companies are not required to hire an external auditor, or release financial statements to the public. - Employees - Employees are not allowed to buy shares in public companies but are allowed to buy shares in private companies. This gives private companies an advantage when hiring and retaining great employees because employees have an incentive to work hard to increase the value of their shares. Documents required for registering a private company in India - Memorandum of Association (MoA) - The MoA is a legal document that outlines the terms and conditions of the company’s formation, including the company’s name, the registered office address, the number of members, the designation of each member, etc. - Articles of Association (AoA) - The AoA is a supplemental document to the MoA that is used to outline the company’s governing body and what its powers are. - Director Identification Number (DIN) - The DIN is a ten-digit number that identifies a person as a director of a private limited company. In order to apply for a DIN, a person must be at least 18 years old and a resident of India. - Representation Letter - A representation letter is a letter that outlines the owners of the company and the percentage of shareholding each person will have in the company. - Certificate of Incorporation (CI) - The CI is the document that is issued by the Registrar of Companies that officially announces the formation of a company. - Memorandum and Articles of Association (MAA) - The MAA is the document that contains the information about the formation of the company and the terms and conditions of the company. - Board of Directors Resolution - The BOD resolution is a document that outlines the decision of the directors to form the company and the names of the directors. Step by step process to incorporate a private company in India - Selecting a name - The first step towards incorporating a private company is to select a name for the company. Remember that the name should be distinguishable from existing trademarks and other companies, and it should not be deceptive. - Finding the right location - The next step is to find the right location for the company’s registered office. The registered office is the place where the company’s management is located. The registered office must be a physical location in India and not a mailing address. - Choosing the right structure - Once the name is decided and the location is set, the next step is to decide on the company’s structure. The structure of the company will depend on the proportion of equity and debt in the company. - Appointing directors - Once the structure of the company is decided, the next step is to appoint directors to the company. A director is a person who is responsible for managing the company on a day-to-day basis. - Appointing the company secretary - The next step is to appoint a company secretary. The company secretary is a person who is responsible for maintaining all the documents related to the company and keeping the shareholders and directors informed. - Obtaining a DIN - The next step is to obtain a Director Identification Number (DIN). This can be done by logging on to the Ministry of Corporate Affairs (MCA) website and filling the application form. Once the application is approved, the DIN will be generated within 7 days. - Applying for registration - The next step is to apply for registration with the MCA. An application for registration can be done online. Once the application is submitted and approved, the company is registered and given a Certificate of Incorporation by the MCA. - Complying with the law - Once the company is incorporated, it must comply with the Indian law. The company must have a registered office, keep minutes of the meetings, maintain financial accounts, keep records of the Articles of Association, keep records of the Memorandum of Association, and maintain a specific format for all the records. Conclusion A private company is a non-public entity that can be owned by its members or shareholders or managers. It is formed by registering it with the Registrar of Companies (RoC) and getting an Certificate of Incorporation. This article will help you understand how to set up a private company in India and what documents you need to incorporate as a Private Company.
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