In this competitive corporate world starting a new business as single entrepreneur is not a good idea. Because in case of proprietorship business, liability of business owner is unlimited and they also struggle to get the funds and better human resources. Nowadays, many people are preferring to join a corporate entity instead of joining a proprietorship business. In this article, we will discuss about the FAQ’s related to Incorporation of Private Limited Company which are usually asked by new entrepreneurs.
Which business form is better out of Partnership/ Private Limited Company/ Proprietorship?
Each type of business form has their own Positive and negative factors. For example in case of Proprietorship & Partnership business form, liability of owner or Partners is unlimited but in case of Pvt. Ltd. shareholder’s company liability is limited to their share capital. Further, Pvt. Ltd. Company has a separate legal entity.
Can a single person incorporate a PVT. LTD. company?
There are need of minimum 2 persons to incorporate a private limited company. You can incorporate an OPC (One Person Company) as a single person, which is recognized and registered with MCA.
What documents required to form a PVT. LTD. company?
- You need to get name approval from Ministry of Corporate Affairs.
- Director’s and Shareholder’s KYC Documents ( like PAN Card, Aadhar Card, Voter Id, Passport, Bank Statement)
- Director’s & Shareholder’s Photo.
- Director’s and Shareholder’s Digital Signature.
- Rent Agreement/ Electricity bill or Lease deed of the business premises of Proposed company
- Signed declarations from Shareholders etc.
Is annual compliances are same in One Person Company and Private Limited company?
In case of OPC (One Person Company) compliances are very less as compare to Private Limited Company.
In case of Private Limited company formation, first of all we need to take name approval from Ministry of Corporate Affairs. If the name is not approved then Private limited company formation with such name is not possible.
What kind of compliances a Private Limited company need to do during the year?
There are many compliances which a pvt. Ltd. company need to do, some of them are given below:
- Conduct Board Meeting on regular interval
- Conduct Annual General Meeting / Extraordinary General Meeting
- Preparation of Minutes
- Maintenance of Books of accounts according to the accounting and auditing standards
- Annual reports filing with MCA (like AOC-4, MGT-7/7A etc.)
- Complete Director KYC
- Income Tax Return Filing
- GST Return Filing
- Auditing
Above, we have mentioned some compliances but there are many others compliances a company has to do. Every few interval of time some old compliances are removed and new compliances are introduced. For that, we need to keep ourselves updated because in case of default we have to pay heavy late fees.
Few Years back, an individual formed a PVT LTD company with their friend, but he/she does not complete their MCA compliances for this company and there is no director KYC done. Whether an individual can become director in new company?
If you have not done Director KYC then Ministry Of Corporate Affairs deactivates your Director Identification Number (DIN). Further, noncompliance by old company impacts your profile. Hence, your appointment without correction of old non compliances is not possible.
If an individual incorporate a PVT. LTD. company, whether any support (Like Subsidy or rebate) is given by Government to start their business?
No such kind of facility is provided. However, if you register PVT. LTD. company under the scheme like UDYAM Aadhar and Startup India (If eligible) then some extra benefits are available as lower Income Tax rate etc., which are usually not available to other companies.
Whether statutory audit is essential in case of Private Limited Company?
Yes, According to the Companies Act, 2013, it is compulsory for a Private Limited company to get their books of accounts to be audited by a Chartered Accountant (CA) on annual basis. After audit you need to submit your financial statements annually to MCA. In case you find default then you have to pay late fee.