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Private Limited Company

A private limited company, or LTD, is a type of privately held small business entity. This type of business entity limits owner liability to their shares, limits the number of shareholders to 50, and restricts shareholders from publicly trading shares.

A type of company that offers limited liability or legal protection for its shareholders but that places certain restrictions on its ownership. These restrictions are defined in the company's bylaws or regulations and are meant to prevent any hostile takeover attempt.

The major ownership restrictions are:
  • shareholders cannot sell or transfer their shares without offering them first to other shareholders for purchase,
  • shareholders cannot offer their shares to the general public over a stock exchange, and
  • The number of shareholders cannot exceed a fixed figure (commonly 200).

Limited by guarantee companies are owned by one or more guarantors. Private limited companies are owned by individual people and/or other companies. The owners of a company limited by shares are known as 'shareholders' because they each own at least one share in the company

A private limited company is a company that can either be limited by shares or by guarantee:

Private company limited by shares:

This means that the company is owned by shareholders. The liability of each shareholder is limited to the original value of the shares issued to them.

Private company limited by guarantee:

When a private company is limited by guarantee, it has members who act as its guarantors. These members contribute a previously agreed amount to support the company in times of trouble.

When setting up your business it’s a good idea to look well into the future to decide where you want to be and where you wish to take your business. If you’re looking to grow your business setting up as a private limited company will help you to share the load and eventually, as the company is a separate legal entity, you could even take a back seat.

But there’s much more to gain from setting up as a private limited company, and while there’s more administration to set up, opting for the help of a formations agent can make it quick, easy and cheaper than you think.

Documents Required For Company Registration
  • Copy of PAN Card of directors
  • Passport size photograph of directors
  • Copy of Aadhaar Card/ Voter identity card of directors
  • Copy of Rent agreement (If rented property)
  • Electricity/ Water bill (Business Place)
  • Copy of Property papers (If owned property)
  • Landlord NOC (Format will be provided)
STEPS FOR COMPANY FORMATION IN INDIA
  • 1. Obtain Director Identification Number DIN for proposed Directors of the new Company
  • 2. Obtaining Digital Signature Certificate DSC for proposed Directors of the Companys
  • 3. Filing the proposed name of company for approval to the Registrar of Companies (ROC)
  • 4. Get the Memorandum of Association and Articles of Association printed
  • 5. Pay stamp duties online
  • 6. File all incorporation forms and documents online, including the Memorandum of Association and the Articles of Association.
  • 7. Obtain the certificate of incorporation
  • 8. Request and obtain Certificate to Commence Operation, if required.
Advantages of a Private Limited Company
  • There are two main advantages of a private limited company. First, it is a separate legal entity, meaning that if it hits bad times you won’t be personally liable - either financially or legally. Setting up as a limited company also makes it less personal when it comes to running your company, as you can share the responsibilities with others much more easily.
  • Sharing the work – with the ability to bring many more people into the mix you’ll be able to benefit from others’ expertise and skills, helping you to keep a clear head for business.
  • Income advantages – as well as limiting your personal liability you’ll also find there are tax benefits is another of the advantages of a private limited company. With the company paying Corporation Tax on taxable profits, you may be protected from higher income tax rates yourself.
  • Tax savings – a private limited company also has the advantage of more tax deductible allowances and costs, which are redeemable against profit.
  • Business continuity – as a business owner if you’re working as a sole trader and you wish to take time off, if you become unwell or if you simply wish to retire, your business will also need to go on hold or close. Setting up as a private limited company means you can choose other people to take control when you’re not there.

FAQs

To incorporate a private limited company, a minimum of two shareholders are required. A minimum of two shareholders and a maximum of up to 200 shareholders are allowed in a private limited company. The shareholders could be natural persons or companies, including foreign companies.
A private limited company must have a minimum of two Directors and can have up to a maximum of 200 Directors.
The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, foreign nationals can be directors in a Indian Private Limited Company.
Yes, a Foreign National or an NRI can be a Director in a Private Limited Company in India after obtaining Director Identification Number. However, at least one Director on the Board of Directors must be a Resident India.
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