How is a private limited company better than a public limited?

A private limited company is a well-known form of business type in India as compared to various other types of businesses. According to statistics, around 93% of company registrations in the country are for private limited companies.

A company is known as a private limited company if it is started and owned by an individual or a group of individuals under private ownership. It means that it is not owned by the Government. You can also get Online Private Limited Company Registration.

Private Limited Company Registration

Limited Liability

The liability of the company refers to the financial dutythat it has to fulfill.  A limited company is essentially said to have ‘limited liability’.

• In the situation oftermination of the company, bankruptcy or if the company falls into a debt trap, the personal finances or assets of the owners remain protected and are not affected, and they are not obligated to meet the liabilities of the company. This is because they hold a separate identity.
• The liability of the owners(shareholders) is only limited to their investment which in this case is their shares.
• Only shares that are unpaid and is held by the owners can be considered to meet the debt of the company. If the shares are fully paid-up, then the responsibility of the shareholders ends.

The risk involved in a limited liability company is that the shareholders might lose the value of their shares if the company goes into bankruptcy or is incurring losses.  The company will not be in a position to pay back the shareholders.

Private Limited Company Registration Process

Before its establishment,the individuals need to follow a private limited company registration process which includes submitting the important necessary documents.

Documents required for Private Company Registration

The Shareholders and Directors need to submit the below documents

1. Scanned copy of PAN card or Passport copy
2. A copy of the address proof of both the shareholders and directors
3. Passport size photograph
4. Rental agreement if the company is starting in a rented property

From company’s Directors/ Members

If the Director or Member is an Indian

1. ID proof in any mentioned form–Passport, Driving License, Voter ID card, Aadhaar Card
2. PAN card of the applicant
3. Copy of bank statement
4. Email ID and mobile number

If the applicant is a foreigner, he needs to submit documents that prove his identity

• Passport copy
• Residential/address proof of the applicant
• Email id and mobile number
• Attested copy of Visa (If the applicant is not present in the country).
• Attested copy of Resident Permit certificate(RPC)

Who controls a Private Limited Company?

Private limited companies are owned and controlled by individual persons, trusts, associations or other corporations. The owners of a company limited by shares are known as 'shareholders' because they each own at least one share in the company.

Section 2(68) of the Companies Act, 2013 lays down the provisions of private companies. The rules and regulations regulate the functioning of private limited companies.  According to it, a private limited company is a company that restricts the transfer of shares and prevent the public from subscribing to them.

 The Section further specifies that the company can have a minimum of 200 members.

Benefits of private limited companies

• Separate Legal Entity
• Uninterrupted existence
• Limited Liability
• Free & Easy transferability of shares
• Owning Property
• Capacity to sue and be sued
• Dual Relationship
• Borrowing Capacity

Elements of Private Limited Companies

• Separate legal entity – It has a distinct identity of its own which is separate from the shareholders, directors, employees and members.
• The liability of individuals in a private limited company is limited thatis calculated on the amount of shares owned by them.
• Non-transferability of shares is one aspect of a private limited that distinguishes the company from other companies. The shares of the company cannot be sold to the public, as mentioned in the Act.
• Non-acceptance of deposits
• Minimum of 2 Directors necessary for incorporating the company.
• The names of the private companies must end with “private limited” or “Pvt. Ltd” as mentioned in the provisions of the Companies Act.

Liability of Shareholders in private limited Companies

• The liability of the shareholderin a Private Limited Company(PLC) is limited to the unpaid amount of shares and it is mentioned in the Memorandum of Articles(MOA)& Articles of Association(AOA).
• The Directors are responsible for the appropriate functioning of the company, even though the shareholdersare called the owners of the company, they are not responsible to run the company or give their contributions in the business activities of the company.

Compliances

Compliances are defined as adapting to the rules and regulations stipulated by the Government, such as policies or laws. Regulatory compliance describes the aim that organizations aspire to achieve in their efforts to ensure that they are aware of and take steps to comply with significant laws, policies, and regulations.

PRIVATE LIMITED COMPANIES

Compliances	Documents Required
Notice of interest by Director (Form MBP-1)	Details of company
Appointment from the auditor	Copy of written consent given by auditor
Intimation by Director (Form DIR-8).	Intimation sent by company to auditor
Filing of annual return (Form MGT-7	Copy of resolution passed by company for appointment of auditor
Filing of financial statement and other documents (Form AOC-4	Details of the companies in which directors already have directorship
Certificate by a PCS in Form MGT-8, when company’s paid up share capital increases to ten crores or more or the turnover reaches fifty crores.	List of all the shareholders as well as debenture holders
Statutory audit of accounts	Copy of MGT-8
Conducting important meetings such as Board Meeting and Annual General Meeting.	Approval letter for extended period of AGM
	Copy of financial statements
	Details of Corporate Social Responsibility (CSR) activities

PUBLIC LIMITED COMPANIES

Compliances	Documents Required
Notice of interest by director(Form MBP-1)	Details of company
Intimation by Director (Form DIR-8)	Details of the companies in which directors already have directorship
Filing of annual return (Form MGT-7	List of Shareholders, Debenture Holders
Filing of financial statement and other documents (Form AOC-4)	Copy of MGT-8
Certificate by a PCS in Form MGT-8, when company’s paid up share capital increases to ten crores or more or the turnover reaches fifty crores or more.	Approval letter for extended period of AGM
Auditor appointment	Copy of financial statements
Filing of resolutions and agreements by filling the Form MGT-14	Details of CSR activities
	Copy of written consent given by auditor
	Intimation sent by company to auditor
	Copy of resolution passed by company for appointment of auditor