How to Form a Private Limited Company? Step by Step Procedure

How_to_form_a_compnayThe private company is a proven, successful business model. It is most common vehicle to carry on business for making profits and also the benefits of an incorporated entity.

Most of us finds very difficult to form a private limited company. Here we summarises the entire practical procedure of formation of company step by step.

A private limited company is generally formed either by incorporation of a new company for doing a new business or conversion of exiting business of a sole proprietary concern or partnership firm into a company.

In this article, you will get the complete information about the procedure to form a private limited company for doing a new business.

how to form a private limited companyBasics Requirements to Form a Company

The incorporation of a company is described in Section 7 of company act, 2013. The basic requirements for formation of a private company are:

  • Minimum 2 members
  • Minimum 2 directors ( the directors and members could be same)
  • Minimum authorized share capital shall be Rs 1,00,000
  • DSC (Digital Signature Certificate) of at least on director
  • DIN (Director Identification Number) of all directors.

Step by Step Procedure to Form a Private Limited Company

1) Apply for PAN

If the promoter does not hold PAN at the time of incorporation, then the first step is to file for PAN in the PAN application form. The documents required are proof id, proof of address, date of birth proof etc.

2) Obtain Digital Signature

The next step is to obtain Digital Signature Certificate from authorizing DSC issuing authority for at least one director. In this era the documents which are to be filed with registrar on the MCA21 requires the digital signature of the Managing Director. The E-form related to incorporation like INC-1 and other documents also require digital signature.

3) Acquire Director Identification number

Every individual who wishes to be appointed as director of the company shall make application for allotment of Director Identification Number in the Form DIR-3. Therefore it is mandatory to have DIN before submission   INC-1 for availability of the name of the company.

4) Apply for name of the proposed company

Then the promoters must apply for name of the company in the E-form INC-1 which should be approved with the concerned ROC of the State by payment of Rs.1000 through Credit card or net banking by describing the capital of company, main objects, state in which the company is to be incorporated and to affix the digital signature of applicant. 6 names can be applied by promoter from which ROC approves one name but in case ROC rejects all the names then the applicant has two more chances to apply for name with same fees as incurred before.

5) Drafting Memorandum of association and Article of association

After getting the name approved, the directors need to draft MOA and AOA. There are 5 main clauses of MOA i.e. Name clause, Registered Office clause, Main object clause, Capital clause and Subscribers clause. Articles are the bye laws of the company and it is mandatory to mention name of first directors. The main objects of the MOA should match with the objects shown in e-form INC-1. These two documents are the basic charter documents of the company so they must be drafted carefully. The table of subscribers should be filled and signed by the subscribers and the minimum investment by subscribers should not be less than Rs.1,00,000.

As per section 4(6), memorandum should be filled in Tables A, B, C, D and E in Schedule I

6) Professional Service

After drafting MOA and AOA, directors will take the Professional Service from CA/ CS to incorporate the company. This is compulsory as for filing incorporation E-Forms to the registrar, the e-form should be signed by one director and also it should be certified by the digital signature of the Professional who certifies that all the information in the documents is correct.

7. Application of Company Incorporation Documents

After the approval of name of the company, promoters should submit the application with prescribed fees and other documents with the registrar within whose jurisdiction the registered office is proposed to be situated. The following documents are required to filed with the registrar of companies of the state in which the company is proposed to incorporated. The documents to be filed are:

  • Form INC-7
  • Form INC-22
  • Form DIR-12

Forms are required to be filed within 60 days as the name is preserved only for 60 days and Stamp duty is to be paid online.

To get complete information about Documents & Forms Required to Form a Private Limited Company – [button color=”blue” size=”large” type=”” target=”” link=””]Visit Here[/button]

8) Duty of registrar to scrutinize the documents

If after filing the above mentioned forms for incorporation with registrar of companies along with fees, ROC is satisfied with the contents of the document filed, ROC will issue the Certificate of Incorporation in Form INC-11 as directed by Rule-18 of companies (Incorporation) Rules 2014.

Useful Links to Know more about Formation & Registration of Private Limited Company

Company Important Pages Check Here
Documents Required to Form a Private Limited Company Check here
Company Income Tax Rates Check Here
TDS on Payment to Foreign Company Check Here
Advantages of Private Limited Company Check Here
Cost to Form a Private Limited Company Check Here

About the Author

arpit goyalArpit Goyal is pursuing CA and & also working as an article assistant in Gurgaon. He has an immense interest in Taxation. He loves to use technology to spread knowledge about taxation & accounts.

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