The right business structure will allow your enterprise to operate efficiently and meet your required business targets. In India, every business must register themselves as part of the mandatory legal compliance. A Private Limited Company is the most common type of Company Registration in India, which is governed by the Companies Act 2013 under the Ministry of Corporate Affairs (MCA). It is mandatory to have a minimum of two directors and two shareholders. These directors and shareholders can either be the same or different individuals, with at least one director being an Indian Resident.
Private Limited Company is a preferred choice for startups and businesses eyeing growth & expansion due to its flexibility in ownership and efficient management.
What are the types of business structures in India?
Proprietorship Firm- A proprietorship firm can be established and managed by a single person. Only one person runs the business, and it is ideal for small business owners with low investments. The entire control of the business will be with the sole proprietor, who can enjoy the profits, but he/she will also have to bear all the business losses.
Partnership Firm- Two or more persons enter into a partnership and establish a partnership firm. The partners of the firm equally share the profits derived from the business. They will also have to bear the losses of the firm. The partnership firm is regulated under the Partnership Act, 1932. It is ideal for small businesses run by two or more persons with low investment.
One Person Company (OPC)-Recently introduced in the year 2013, an OPC is the best way to start a company if there exists only one promoter or owner. It enables a sole proprietor to carry on his work and still be part of the corporate framework. It is registered under the Companies Act, 2013. It is ideal for small businesses who want to raise capital.
Limited Liability Partnership (LLP)- An LLP is a separate legal entity where the liabilities of partners are only limited only to their agreed contribution. An LLP is established under the Limited Liability Act, 2008 with the Registrar of Companies (ROC). It has features of both the partnership firm and the company. It is ideal for businesses established by partners who want limited liability.
Private Limited Company – A Private Limited Company in the eyes of the law is regarded as a separate legal entity from its founders. The directors of the company look after the affairs of the company. The shareholders (stakeholders) invest in the company and are part owners. A PLC is registered under the Companies Act, 2013 with the ROC. It is ideal for medium to big businesses who wish to raise capital.
Public Limited Company- A Public Limited Company is a company established by seven or more members under the Companies Act, 2013. The directors are responsible for the affairs of the company. It has a separate legal existence and the liability of its members are limited to the shares they hold. It is ideal for medium to big businesses who wish to raise capital from the public.
Why is it important to choose the right business structure?
It is important to choose your business structure carefully as your Income Tax Returns will depend on it. While registering your enterprise, remember that each business structure has different levels of compliances that need to be met with. For example, a sole proprietor has to file only an income tax return. However, a company has to file an income tax return as well as annual returns with the Registrar of Companies.
A company’s books of accounts are to be mandatorily audited every year. Abiding by these legal compliances requires spending money on auditors, accountants and tax filing experts. Therefore, it is important to select the right business structure when thinking of company registration. An entrepreneur must have a clear idea of the kind of legal compliances he/she is willing to deal with.
Comparative List of Different Types of Business Structures in India
| Company type | Ideal for | Tax advantages | Legal compliances |
| Limited Liability Partnership | Service-oriented businesses or businesses that have low investment needs | Tax holiday for first 3 years under Startup India and benefit on depreciation | Business tax returns and ROC returns to be filed |
| One Person Company | Sole owners looking to limit their liability | Tax holiday for first 3 years under Startup India, higher benefits on depreciation and no tax on dividend distribution | Business tax returns and ROC returns to be filed |
| Private Limited Company | Businesses that have a high turnover | Tax holiday for first 3 years under Startup India and higher benefits on depreciation | Business tax returns to be filed, ROC returns to be filed and mandatory audit to be done |
| Public Limited Company | Businesses with a high turnover | Tax holiday for first 3 years under Startup India | Business tax returns to be filed, ROC returns to be filed and mandatory audit to be done |
What is a private limited company?
In India, a private limited company is a privately held entity with limited liability, and it ranks among the nation’s most favored business structures. This popularity is primarily attributed to its numerous advantages, including limited liability protection, ease of formation and maintenance, and its status as a distinct legal entity. This encourages a prospective businessman to start company. A private limited company enjoys legal separation from its owners and necessitates a minimum of two members and two directors for its operation. Here are the key characteristics of a private limited company in India:
Benefits of PVT Company Registration
Growing Economy
India is a place with many historical sites, artistic and cultural richness, forts, palaces, lakes, wildlife sanctuaries, sand dunes, traditional dance and music, handicrafts, and beyond. Hence, the state is a valuable asset to the state’s economy. The surge in tourism has led to the growth of the hospitality sector, generating increased employment opportunities within the service industry. Moreover, the state is witnessing an expansion of its IT workforce.
Protect Your Finances:
To register PVT ltd company in India as a private limited company, limited liability partnership (LLP), or one-person company (OPC), you limit your personal liability for the company’s debts. This shields your personal assets from legal disputes or financial challenges.
Create a Legal Entity:
Registering as a private limited company online, LLP, or OPC establishes a distinct legal identity for your business, separate from its owners. This legal separation allows your company to own property, engage in contracts, take legal action, and continue its existence independently.
Facilitate Funding:
Choosing to register a private limited company online, LLP, or OPC status provides access to diverse funding sources like equity, debt, angel investors, venture capitalists, and financial institutions. You can issue shares and debentures, even attracting public capital.
Tax Advantages:
Opting to register PVT ltd company in India or startup registration in India offers various tax benefits and exemptions under the Income Tax Act, of 1961. This includes deductions for business-related expenses, depreciation on assets, and favourable corporate tax rates compared to other business structures.
Types of Private Limited Companies
Documents Required
Submit updated documents for all directors and shareholders:
- PAN card
- Aadhaar card
- Passport (if foreign national)
- Photograph
- Proof of identity (e.g., voter ID card, driving license)
- Proof of address (e.g., bank statement, utility bill)
- Proof of educational qualification (e.g., degree certificate)
- For the registered office, provide:
- Proof of ownership (e.g., sale deed, lease deed, rent agreement)
- Proof of occupancy (e.g., electricity bill, water bill, property tax receipt)
- No objection certificate (NOC) from the owner or landlord
Private Limited Company Incorporation Process
- Obtain a Digital Signature Certificate (DSC)
a. A DSC is a digital method of verifying or attesting a document.
b. The DSC is often issued with one-year or two-year validity. DSC is mandatory for all witnesses in the Memorandum of Association (MOA) and Articles of Association (AOA). - Apply for Name Approval using SPICe+ Part A
a. Part A of the SPICe+ form provides for ‘Name Reservation’ with two proposed names and one re-submission (RSUB).
b. You must re-file another SPICe+ form with the specified fee if the name is rejected due to a name resemblance with a registered company, an LLP, or a trademark or due to non-compliance with the MCA guidelines.
Note: You can simultaneously apply for name approval (Part A) and Incorporation (Part B) through SPICe+. But in cases where both parts are simultaneously filed, you can reserve only one name. - Apply for Company Registration using SPICe+ Part B
Following name approval, Part B of the SPICe+ form must be submitted to finish the registration process. Part B helps complete the following steps:
i. Application for allotment of DIN (Director Identification Number)
ii. Incorporation of a new company
iii. Submission of e-MoA(INC-33) and e-AoA (INC-34)
iv. Application for PAN and TAN (mandatory)
v. Application for EPFO registration (mandatory)
vi. Application for ESIC registration (mandatory)
vii. Application for Professional tax registration (only for Maharashtra)
The information entered in SPICe+ Parts A and B is immediately transferred to the associated forms AGILE-PRO, eAoA, eMoA, and INC-9 (as applicable). - Open a bank account
Open a Current account for your company for seamless transactions & business operations. A current account offers the flexibility to handle various financial aspects, such as receiving client payments, making supplier payments, and managing payroll. - File for the Commencement of a Business Certificate
The commencement of a Business Certificate is the declaration that the Director of the Company needs to file with the Registrar of Companies. It is filed through Form INC-20A within 180 days of the incorporation of the Company.
FAQs
Can my family members register as my partners?
Yes! The family members can register as members.
Is there a minimum capital required to start a company?
Technically you need not produce any document regarding your capital for pvt.ltd company registration. But, it is always good to have financial stability before you kick-start the business!
