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Home > Income Tax > Help Center > PLC - ExplainedLast Updated: Dec 29th 2023

Private Limited Company - Explained

Private Limited Company registration is the most popular legal structure option for businesses in India. Private limited company can have a minimum of two members and a maximum of two hundred members. The directors of a private limited company have limited liability to creditors. In case of default, banks / creditors can only sell company’s assets but not personal assets of directors.

Private Limited Company - Explained

Most popular choice among today's Startups to bring visibility, and raise funding.

This document covers

  1. Key Features of Private Limited Company
  2. Steps to Register a Private Limited Company
  3. FAQs

1. Key Features of Private Limited Company (PLC)

  • Registration is comparatively Fast.
  • It’s easy to fetch funding in a private limited company by transferring of shares.
  • Easy to convert in to a Public Limited Company at any stage subject to fulfilment of eligibility criteria.
  • Maintenance of Basic Compliances after registration of private limited company are comparatively complex.
  • There exists no Bar on Turnover and Capital in a private limited company structure unlike in One Person Company (OPC).

2. Steps to Register a Private Limited Company (PLC)

While will take care of the entire process in registering a company, below are few steps to understand the process.

  • Obtain Digital Signature Certificate [DSC] for the proposed Director(s).
  • Obtain Director Identification Number [DIN] for the proposed director(s).
  • Select suitable Company Name, and make an application to the Ministry of Corporate Office for availability of name.
  • Draft Memorandum of Association and Articles of Association [MOA & AOA].
  • Sign and file various documents including MOA & AOA with the Registrar of Companies electronically.
  • Payment of Requisite fee to Ministry of Corporate Affairs and also Stamp Duty.
  • Scrutiny of documents at Registrar of Companies [ROC].
  • Receipt of Certificate of Registration / Incorporation from ROC.

3. FAQs

1.How much time is needed for setting up a private limited company in India?

If you have all the documents in order, it will take no longer than 15 days. However, this is dependent on the workload of the registrar.

2.What are the rules for picking a name for a private limited company?

The Registrar of Companies (ROC) across India expect applicant to follow a few naming guidelines. Some of them are subjective, which means that approval can depend on the opinion of the officer handling your application. However, the more closely you follow the rules listed below, the better your chances of approval. First, however, do ensure that your name is available.

Unique Component: In Flipkart Internet Private Limited, Flipkart is the unique component. Now, once taken, the name Flipkart will not be given to any other business within the suffix Internet or even related categories (E-commerce and Online Solutions, for example). But there is some subjectivity, too. Some RoCs may not even approve the name Flipkart Chemicals Private Limited, reasoning that the e-commerce brand Flipkart is too well-known. Similar sounding names would also be rejected (so no Flipkart).

Blacklist: Abbreviations, adjectives and generic words are rejected. So BBC or XYZ would be rejected, as would Good Quality Biscuits. The words bank, exchange and stock exchange, unless approved by RBI or SEBI, would also be rejected.

No Common Trademark: There should not be a registered trademark by the same name on the IP India website. If there is one, the name can only be approved if you are able to get a No-Objection Certificate from its owner authorising you to use it.

Descriptive Component: In eComm Research Private Limited, the word 'Research' describes the business the company is into. You cannot have 'Research' in your name if you're, say, in the logistics or restaurant business.

3.What documents are required to complete the process?

All directors must provide identity and address proof, as well as a copy of the PAN Card (for Indian Nationals) and Passport (for foreign nationals). Certificate must be submitted by the owner of the registered entity.

4.Does a private limited company have continuous existence?

Yes, so long as the annual compliances are met, the private limited company will continue to exist. If you do not comply with the requirements such as KYC, INC22A, DIR3 etc & other regulations, it will be strike off from the register altogether.

Get to know more at private limited company compliance life cycle

5.How much does it cost to run a private limited company?

The cost of running a private limited company can be divided into four categories: cost of setting a private limited company, cost of accounting and compliance and miscellaneous expenses. At the very minimum, you can expect to spend Rs. 30,000 on all of these at the beginning of the company formation. Later it would be from Rs. 18,000 per annum.

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