The Ultimate 10-Step Guide to Incorporating a Private Limited Company in India

Incorporating a private limited company in India is an essential step towards establishing a business entity. A private limited company offers numerous advantages, including limited liability, separate legal existence, and perpetual succession. Obviously, there are procedures to heed and paperwork to prepare, but if you understand how to do them, the entire business registration process will seem rather smooth and fast.

This step-by-step guide will outline the process of incorporating a private limited company in India, ensuring that you have a clear understanding of the necessary steps and requirements involved.

But before we dig into the process, let us quickly gloss over what defines a private limited company and its prerequisites.

What is a Private Limited Company?

A private limited company is a privately held, officially recognized business organization that is privately held by individual shareholders. Section 2(68) of the 2013 Companies Act specifies the legal conditions of this type of business. Additionally, it provides shareholders with restricted liability according on the number of shares they own and financial transparency.

Prerequisites to Setting up a Private Limited Company in India

Directors and Shareholders: According to the most recent amendment to the Companies Act of 2013, one director must be an Indian citizen who has lived in India continuously for at least 12 months. One more could be a resident who is foreign or Indian. Shareholders might be either an individual or a business. In the event of a corporate entity, a person is qualified to act in the capacity of a shareholder on behalf of the business.

Registered Office in India: The company’s Registered Office (RO) must be in India. Once your business has been established, you must additionally provide the ROC with the registered office’s permanent address. The business has the option of using a home or commercial property as its RO Address, this can be done by producing proof of address in the form of recent phone bills, water bills, or electricity bills that are not more than two months old.

10-Step Process to Incorporating a Private Company in India

Step 1: Determine the Proposed Company Name

The first step in incorporating a private limited company in India is to select a unique and appropriate company name. Ensure that the name adheres to the guidelines provided by the Ministry of Corporate Affairs (MCA). The chosen name should not be identical or similar to any existing company or trademark, and it should not violate any legal provisions. Further, it is also recommended that the registered name indicates the line of business the company is into, which helps in both creating a unique name and brand recall for the company.

Step 2: Obtain Director Identification Number (DIN)

The next step is to obtain a Director Identification Number (DIN) for all proposed directors of the company. This DIN can be accessed by raising a digital application or e-request with the Ministry of Corporate Affairs. Ensure that all the necessary documents, such as identity proof, address proof, and photographs, are submitted along with the application.

Step 3: Acquire Digital Signature Certificate (DSC)

To ensure the authenticity and security of the documents filed electronically, you need to obtain a Digital Signature Certificate (DSC) for at least one proposed director. This can be done by submitting the required documents to a government-approved certifying agency. The DSC will serve as a digital equivalent of a handwritten signature for online filings. According to the Information Technology Act of 2000, this DSC will be used on all papers for securely submitting e-forms. Getting DSC is the first step in securely submitting electronic documents. The Controller of Certification Agencies (CCA) is where DSC is purchased. It has a one-year minimum validity. The validity may be increased to two years.

Step 4: Prepare and File Documents for Incorporation

Following the completion of the aforementioned procedures, along with the forms for the MoA (Memorandum of Association) and AoA (Articles of Association), the SPICe (Simplified Proforma for Incorporating a Company Electronically) form can be used to submit an application for the certificate of incorporation. The MOA contains details about the company’s objectives, while the AOA outlines the rules and regulations governing the company’s internal affairs. These documents should be prepared in accordance with the prescribed format and submitted to the Registrar of Companies (RoC) electronically.

Step 5: Pay the Requisite Fees

The registration of private limited companies is overseen by the country’s Ministry of Corporate Affairs (MCA). MCA Stamp duty and normal form filing costs are two variables that affect registration form fees. The minimal form fees for PLC registration begin at INR 2000 because Stamp Duty varies depending on authorized capital and the state in which the business is registered. Calculate the prescribed fees based on the authorized share capital and stamp duty applicable in your state. Make the necessary payment online through the MCA portal using internet banking, credit/debit card, or other approved payment methods. Upon successful payment, you will receive a payment acknowledgment.

Step 6: Verification and Approval by RoC

Once the incorporation documents and fees are submitted, the Registrar of Companies will review the application. If the documents are in order and comply with the requirements, the RoC will issue a Certificate of Incorporation (COI) containing a unique Corporate Identification Number (CIN) for the company. This signifies the successful incorporation of the private limited company.

Step 7: Obtain Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN)

After receiving the COI, apply for a Permanent Account Number (PAN) from the National Securities Depository Limited (NSDL). PAN is essential for various financial transactions and tax purposes. Additionally, if you plan to deduct or collect taxes on behalf of the government, apply for a Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.

Step 8: Register for Goods and Services Tax (GST)a

Depending on your business activities, you may be required to register for Goods and Services Tax (GST). GST is a unified indirect tax applicable to the sale of goods and services in India. Register for GST on the GST portal by providing the necessary details and documents, including the COI and PAN.

Step 9: Open a Bank Account and Deposit the Minimum Capital

After obtaining the COI, PAN, and TAN, open a bank account in the name of the company. Provide the necessary documents, such as the COI, MOA, AOA, and KYC documents of the directors, to the bank. Deposit the minimum capital required as per the MOA into the newly opened bank account.

Step 10: Commence Business Operations

With the bank account set up and minimum capital deposited, you are now ready to commence your business operations. Ensure compliance with all applicable laws and regulations, including annual compliances, maintaining proper books of accounts, and filing tax returns as per the prescribed timelines.

Conclusion

Incorporating a private limited company in India involves a series of important steps, from selecting a unique company name to obtaining the necessary registrations and certifications. It takes around 10-15 working days for the entire procedure, including the approval of the DIN, Name, and incorporation.

These days, however, the process of forming a company has accelerated because all necessary papers are included in a single MCA application form. It is a significant step towards e-governance and for companies wishing to grow their operations. By following this step-by-step guide, you can navigate the process smoothly, ensuring compliance with legal requirements and setting a strong foundation for your business.

Reviewed By:

Arun Mehra

Samera CEO

Arun, CEO of Samera, is an experienced accountant and dental practice owner. He specialises in accountancy, financial directorship, squat practices and practice management.