PRIVATE LIMITED COMPANY MEANING: A private limited company is a voluntary association of not less than two and not more than fifty members, whose liability is limited, the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures. FEATURES: 1. It has an independent legal existence. 2. The Indian Companies Act, 1956 contains the provisions regarding the legal formalities for setting up of a private limited company. 3. The Registrars of Companies (ROC) appointed under the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies floated in the respective states and the Union Territories. CHARACTERISTICS: 1. it need not file a prospectus with the Registrar. 2. it need not obtain the Certificate for Commencement of business. 3. it need not hold the statutory general meeting nor need it file the statutory report. 4. restrictions placed on the directors of the public limited company do not apply to its directors. 5. The liability of its members is limited. 6. The shares allotted to its members are also not freely transferable between them. These companies are not allowed to invite public to subscribe to its shares and debentures. 7. It enjoys continuity of existence i.e. it continues to exist even if all its members die or desert it. Hence, a private company is preferred by those who wish to take the advantage of limited liability but at the same time desire to keep control over the business within a limited circle and maintain the privacy of their business. Advantages: 1. Continuity of existence 2. Limited liability 3. Less legal restrictions Disadvantages: 1. Shares are not freely transferable 2. Not allowed to invite public to subscribe to its shares 3. Scope for promotional frauds 4. Undemocratic control. REGISTRATION OF A PRIVATE LIMITED COMPANY: The registration of companies as also subsequent filings can be done online. Still, there are a couple of stages where an authorized person has to make a personal appearance—for instance, during the vetting of the memorandum and articles of association and during the stamping of the documents. Before starting the process of registering your company, the prospective directors must have director identification numbers (DIN) and digital signature certificates. After acquiring the two, they have to get the name of the company approved by the concerned Registrar of Companies (ROC), which is done by filling Form 1A. They can give a maximum of six names and the ROC replies within seven days as to the availability of the names. In practice, however, the name-approval process only takes two to three days. Once the name is approved, the next step is drafting the memorandum and articles of association (MOA and AOA). The difference between the two is that the articles contain only those clauses that define the internal functioning of the company. On the other hand, the memorandum of a company defines important clauses such as authorized capital clause and the object clause. The authorized capital clause determines the extent to which the ownership base can be expanded by issuing fresh shares or other instruments in the future. The object clause defines the objectives of the company and has two sections; one for the main objectives and the second describing the other businesses that you might want to get into at a later stage. After the MOA and AOA are prepared they are printed and sent to the concerned registrar for vetting and to mark out objections, if any. The documents are then stamped (the stamp duty varies from state to state) and finally all the documents along with some other details like particulars of appointment of managing director, directors, manager and secretary are sent to the concerned registrar. The last step is to pay the registration fee, which varies on the basis of the company’s authorized capital, after which the company gets registered as a private limited company under the Companies Act, 1956 and gets its certificate of incorporation. The whole process to get the certificate of incorporation for a private limited company takes roughly about 15-20 days. One thing to keep in mind is that the registration must be done at the regional office of the Registrar of Companies where the registered office is to be located. There are some more things that are required by a private limited company, like getting a permanent account number and a company seal, after it is registered. However, unlike a public limited company, a private company can begin its operation right after getting a certificate of incorporation and complete the rest of the formalities simultaneously. INCOME TAX RATE OF PRIVATE LIMITED COMPANY: Income Tax charged at 30% of total income. Surcharge at 10% if total Income Exceeds Rs. 10 Crore. Educational Cess is payable at 3% of the total of Income Tax.
Posted on: Sat, 24 Aug 2013 05:51:47 +0000
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