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The Private Ltd Company is one of the most preferred business legal forms by growing Indian start- ups. It is governed by the MCA (Ministry of Corporate Affairs) and regulated by the Companies Act, 2013 and the Companies Incorporation Rules, 2014.
Today, Start Up and young entrepreneurs prefer private limited companies over traditional proprietorship and partnership firms due to several benefits of formation of Private Limited Company
As the ownership of a company is represented by shares, the ownership of a company can be transferred to any other legal entity or person in India or abroad easily - in part or whole. The directors can also be replaced to ensure business continuity.
Shareholder enjoys limited liability to the extent of capital invested. In case of any unforeseen liabilities, it would be limited to the company and not impact the shareholders. Shareholder's personal assets protected in the event of the company's insolvency.
A Company can easily raise funds from investors on an equity basis i.e. from persons or entities interested in becoming a shareholder.
A company is a Separate legal entity from its Owners and Management in the eyes of law. It can have a PAN number, bank accounts, licenses, approvals, contracts, assets and liabilities in its unique name.
Management & shareholders can be separated. A shareholder can invest the fund in fruitful business without managing & Management can operate their business without frequent interruption of investors.
Since a Company is a separate legal entity, it can sale, purchase and own the property like individual.
Company existence will go for ever and its existence will not be effected by the death of shareholders, directors or transfer of shares to others.
Company can take legal action against another and also other person can take legal action against company separate from directors, shareholders & promoters.
| Characteristics | Pvt. Ltd. Company | Proprietary Concern | Partnership Firm | LLP | OPC |
|---|---|---|---|---|---|
| Separate Legal Entity | YES |
NO |
NO |
YES |
YES |
| Governing Act | Companies Act, 2013 | No specific Act | Indian Partnership Act, 1932 | Limited Liability Partnership Act, 2008 | Companies Act, 2013 |
| Registration | Mandatory | Not Required | Optional | Mandatory | Mandatory |
| Liability | Limited | Unlimited | Unlimited | Limited | Limited |
No. of Members |
2 - 200 | Only 1 | 2 or more partners, 10 for banking , 20 for non-banking | 2 or more partners | 1 Member and 1 Nominee |
Dissolution |
Legal procedures for winding up orliquidation as the case may be | The proprietor has the sole authority | The proprietor has the sole authority | With Consent of partners | Legal procedures for winding up orliquidation as the case may be |
Succession |
A company has perpetual succession | Legal Heir | Remaining Partners and Legal Heir of deceased partner with consent of other partners | Remaining Partners | Nominee |
| Filing of financials with regulatory authorities | Financial statements are to be filed annually with Registrar of Companies | Not Applicable | Not Applicable | Financial statements are to be filed annually with Registrar of Companies | Financial statements are to be filed annually with Registrar of Companies |
| Filing of forms for creation of charge (in case of loans taken). | Required to file adequate forms with Registrar of Companies | No legal formalities | No legal formalities | Required to file adequate forms with Registrar of Companies | Required to file adequate forms with Registrar of Companies |
| Statutory Compliance | Apart from Annual filings, it has to comply with various provision laid down, but less compared to public company | No compliances and no requirement to file a separate ITR | Separate ITR of partnership is filed, else there is no filing requirement | Annual filing and few event based filings are necessary | Apart from Annual filing, compliances are less compared to Private Company |
Audit Compliance |
Compulsory | Subject to turnover of the firm | Subject to turnover of the firm | Only if contribution more than Rs. 25 lakhs or turnover exceeds Rs. 40 Lakhs | Compulsory |
~ Conveyance/ Lease deed/ Rent Agreement
~ NOC from Owner
~ Latest Utility Bill of registered Office
~ PAN Card
~ Identity Proof ( Voter’s ID / Passport / Driving License )
~ Address Proof ( Latest Telephone Bill / Electricity Bill/ Bank Account Statement )
~ Photograph
Taxes Applicable
Taxes Applicable