Frequently asked questions.
Here’s what you need to know-answers to most of the Frequently Asked Questions from Entrepreneurs, Professionals or others looking about LLP.
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PRIVATE LIMITED COMPANY:
This segment consists of every basic detail one should know while incorporating a Limited Liability Partnership (LLP) firm.
A Private Limited Company is the most popular type of business entity in India. A private limited company is a company that is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the number of shares respectively held by them. Shares of Private Limited Company cannot be publicly traded.
Directors are managers of the company. The form the Board of Directors. They are responsible for looking into the company's day-to-day operations.
Authorised capital shows the maximum amount of capital that a company can raise by the way of issue of shares at the present or in the future.
Paid-up capital refers to the actual amount raised by the company i.e, the amount paid by the shareholders for the issuance of shares. Paid-up capital should be less than or equal to authorised capital and cannot exceed the authorised capital while registering the company.
If you are struggling to find another director for your private limited company, you can choose a family member or a close relative as the director of the company. You can also start a One Person Company (OPC), where only one director is enough to start a firm.
Digital Signature Certificate (DSC) is an electronic signature in the USB Token. It is used to sign any applications or company-related documents electronically. You should keep your DSC safe, as it is as important as your physical handwritten signature.
Directors Identification Number is allotted to every director of the company from the Ministry of Corporate Affairs (MCA). It will be mapped with the Permanent Account Number (PAN) card and will be issued only once. According to the Companies Act, having more than one Directors Identification Number (DIN) is a punishable offence.
Reserve Unique Number (RUN) is a web service used for reserving a name for a new company or for changing its existing name. The web service helps you verify whether the name you have chosen for your company is unique. The applicant must provide 2 alternative names with the application. The Register of Companies (RoC) has complete discretion in the name approval. Make sure to follow the specific guidelines proposed by the Companies Act of 2013. Once the name is approved, the application to incorporate the company should be filed within 20 days.
SPICe (Simplified Proforma for Incorporating a Company Electronically) is a comprehensive form through which an application for Name reservation. Incorporation of a company. Allotment of DIN. To apply for the certificate of incorporation online submission of SPICe Form with Memorandum of Association and Article of Association is required.
Memorandum of Association prescribes the scope of operation of the Company by explaining the main objectives and the activities of the Company.
Article of Association provides the manner of operation and administration to be carried on. Both Memorandum of Association (MoA) and Article of Association (AoA) are important documents and should be drafted carefully with the consultation of a professional.
During the incorporation of a company, one of the key documents executed is the MOA subscriber sheet. Based on the undertaking by the promoters in the MOA subscriber sheet, share certificates are issued in the first Board meeting of the company. The promoters of the company must handwrite their names and the number of shares taken by them in the MOA subscriber sheet. It is important that the details be handwritten, as it makes it a binding contract on the subscribers to abide by the clauses specified in the MOA.
The Director should intimate to the Board whether he/she is Qualified or Disqualified to act as a director of the Company. As per the Companies Act, Director should submit Intimation for Disqualification in Form DIR-8 while Incorporating the Company and in every First Board Meeting of subsequent Financial years. The Board of Directors needs to take note of the same and pass the required resolution.
Every individual who wishes to become a director needs to provide a declaration for Appointment and Qualification in form DIR-2. Form DIR-2 is the consent to act as a director of the proposed company. It contains details of DIN/ PAN, Name, Address, Contact Details, Occupation Details of each director of a company. It is a mandatory attachment while filing SPICe INC-32 on MCA Portal.
While filing the SPICe INC-32 form for incorporation of a company, Form INC-9 for a declaration by Subscriber / First Director of a company needs to be attached. It is a mandatory attachment while filing SPICe INC-32 on MCA Portal.
The copies of resolutions passed at the meeting of the board of directors of a company may be required to be provided to statutory authorities while making applications on behalf of the company or in other cases, copies may be provided to any organization/individual for some business or other purposes.
Section 13 of the Companies Act deals with objective clause of the Memorandum of Association (MoA) to be submitted to the Registrar of Company (RoC) at the time of corporation of a Company. MoA provides certain kinds of business that the company undertakes.
'Ltd' represents a widely held Public Limited Company which allows the public to be a part of the Company. Whereas, 'Private Ltd' represents a closely held Private Limited Company which prohibits the public from subscribing the shares.
PROs AND CONs:
Compliance has a knock-on effect on how your business can grow, improve and thrive. Here are the important compliances that are applicable to an LLP.
The most important advantages of a Private Limited Company are:
It has the benefit of limited liability,
It increases the trust with clients,
Obtaining bank loans will be an easy process,
It improves credibility, which enables approval of tenders or proposals easily
A private limited company will also attract investors.
The main restrictions in registering a Private Limited Company are as follows:
No free transfer of shares,
Shares are not listed on the Stock Exchange, as they cannot be offered to the public and
Maximum members are limited to 200.
To meet your objective, it is necessary to know the advantages and disadvantages. Here are some pros and cons of an LLP.
In order to establish a private limited company, the requirements are as follows:
There must be a minimum of 2 to a maximum of 200 shareholders,
The authorised share capital must be at least ₹1Lakh,
There must be a minimum of 2 to a maximum of 15 board of directors and
The place of business must be located in India.
The following are the compliances of a Private Limited Company:
Every Financial Year: One Annual General Meeting and at least 4 Board Meeting, one in each quarter,
Accounts and Financial Statements of a Company should be audited by an independent auditor appointed within 30 days of incorporation of a company,
AOC-4 and MGT-7 are also part of annual compliances.
Heavy penalties are imposed with the compliances are not met.
The following are the required documents to be submitted for incorporation of a private limited company:
The board of directors address and Identification proof,
Latest passport size photo,
Place of business proof like rental deed and Electricity Bill Card of the office premises,
Directors Identification Number (DIN), once received,
Permanent Account Number (PAN) Card and
Director's Saving bank Account details.
The following are the documents for the registered office and statutory form:
Proof of Registered Office, latest Utility Bill, NOC from the owner of the premises, and Signed Declaration(s) from the promoters.
To make a foreigner as a Director the following documents are necessary:
Notified Copy of Passport and
The director's Driving license
A business cannot be commenced by mere investment alone. This segment deals with the requirements to form an LLP.
Private Limited Company is registered with the Ministry of Corporate Affairs. Name application and Registration can be done within 2 weeks if all the documents are in order. It is recommended to register a Private Limited Company with the help of a professional as it involves complicated processes like approval of name, Article of Association and Memorandum of Association, Identification of Director, Approval from local Registrar of Company, etc. Professional assistance can be required while observing several pre-requisites.
The procedure to register a Private Limited Company are as follow:
Register the company with the registrar of companies and respective authorities.
File in the details from the necessary documents in mca.gov.in
The primary procedure is to obtain name approval from the Registrar of the Company. The name must be unique, describe the business and entity type. For Example Infosys Tech Private Limited.
A digital signature is mandatory. It is used for signing online documents.
Directors must acquire a Directors Identification Number (DIN) which is a unique number given to every director of the company.
Preparation of Memorandum of Association and Article of Association which must be approved by the Registrar of the Company.
If all the documents are rectified by the RoC, the Certificate of incorporation will be approved.
It takes nearly 15 to 20 working days for a company to complete all the legal formalities and to be registered as a Private Limited. The time limit is subject to the time taken by the Government officials to process the application.