Private Limited Company Registration
Private Limited Company can be defined as a Company which is having private ownership. Private Company may issue shares on the basis of a private placement and have shareholders but their shares cannot trade on public exchanges.
A Private Company is having separate legal entity distinct from its members, it should have a minimum number of 2 shareholders and maximum of up to 200 shareholders.
It should have a minimum number of 2 directors and it can have a maximum number of 15 directors.
Exemptions to private limited company
- Incorporation by single form i.e. INC-29.
- Now it is possible with the single form to file for Name availability, allotment of DIN, Company incorporation & commencement of business.
- No need for the minimum capital requirement as previously required.
- Any interested Director can participate in the meeting in which discussion regarding such transaction is taking place in which he is interested only after he has disclosed his interest.
- To appoint more than 1 director it is not required to pass separate voting resolutions. In other words, a simple vote could also decide the appointment of two or more directors through a single resolution.
- ESOP can be given by ordinary resolution no special resolution is required to be passed.
The advantage of forming a Private Company:
1. Limited Liability:
As the shareholders have limited liability in a Private Limited Company as per their shareholding this is one of the most important advantages of incorporating a Private Company. This was experienced during the recession which lasted from 2007-2009 where many businesses were closed down and the owners have to pay off the dues but in case of a private limited company, there are no personal liabilities.
2. Restricted Trade of shares:
This can be considered as an advantage because the restriction placed on the transferability of shares will prevent the hostile takeover as the shares cannot be acquired by the outside buyers.
3. Continued Existence:
As it has the existence even after the owner dies, it has an independent legal identity.
4. No minimum capital requirement:
As per earlier law, there was a mandatory requirement that to incorporate a private limited company there should be a minimum paid up capital of 1,00,000 but this requirement has been taken away by Companies Act 2013 as per 2013 Act no minimum capital is required now.
Reasons why to opt for Private Limited Company registration :
1. As nowadays the success of the business is possible only if the employees are working efficiently, employees will work efficiently only when they are paid a handsome amount and something more is paid apart for basic salary. So only in case of Private Limited company and Public Company ESOP can be offered to its employees which will retain the talent of efficient employees.
2. In today’s scenario, the basic requirement for the growth of any business is capital, no business can be grown unless a sufficient amount of capital is infused in it. So the capital requirement of a private limited company can be fulfilled easily as it can issue private equity shares which are easily acquired.
3. The problem of a hostile takeover is not possible in case of a private limited company as the shares are not freely transferable so no outside buyer can acquire the shares so there are no chances of a hostile takeover.
4. In today’s scenario people like to get connected only with that business which is having transparency in case of sole proprietorship or limited liability partnership business are not registered with MCA so it is not easy to track their status but in case of Private Limited Company as they are registered on MCA any person before having a relationship with the company can easily track its record.
5. As in another form of business, it is not easy to exit but in case of a private limited company, there is an exit strategy as all the shares can be sold or transferred to other entity without any difficulty.
6. Only Private limited Company allows 100% Foreign Direct Investment through automatic route. So funds from foreign can be received easily
What is Annual Taxation requirement of Private Limited Company?
1. Minimum Alternate Tax:
In case your taxable income does not exceed 1Crore – 20.0077%
In case your taxable income does not exceed 1Crore – 19.055%
2. Surcharge:
It is applied only when the income exceeds 1Crore during the year.
3. Dividend Distribution Tax:
The dividend given by the company is required to pay DDT @ 16.2225%
4. Loans to Director :
It is treated as a deemed dividend in the hands of a director so liable for the tax.
5. Expenditure for family planning for the benefit of employees:
It cannot be claimed as deduction u/s 36(1) (ix) as per Income Tax Act 1961.
6. Remuneration to Director:
Remuneration can be paid there is no maximum ceiling limit.
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