A private limited company in India is a type of business entity that is formed under the provisions of the Companies Act, 2013. It is a popular form of business structure that combines the advantages of a limited liability and the flexibility of a privately owned company. Here’s what the term “private limited company” means in Chennai:
Limited liability:
The term “limited liability” means, the liability of the shareholders is limited. It is limited to the amount they have invested in the company. In case of any debts or liabilities of the company, the personal assets of the shareholders are generally protected. They are not personally liable for the obligations of the company.
Private ownership:
A private limited company is privately owned, meaning its shares are held by a select group of individuals or entities. The maximum of 200 shareholders can be present in a private limited company. The ownership and management of the company are closely held, usually by the promoters or a group of family members, friends, or investors.
Separate legal entity:
A company with private limited company registration in Chennai is considered a separate legal entity from its shareholders. It has its own legal identity. This means it is distinct from its owners. Also it can own assets, enter into contracts, sue or be sued, and undertake various business activities in its own name. The company’s existence is not affected by changes in its shareholders or directors.
Features
A private limited company is a popular form of business entity in India that offers several benefits and features to its shareholders.
Incorporation:
A private limited company is formed by registering with the Registrar of Companies (ROC) under the provisions of the Companies Act, 2013. The company must have a minimum of two shareholders and two directors. However, one of the directors must be a resident of India.
Limited liability:
One of the most significant advantages of a company having private limited company registration in Chennai is limited liability. The liability of the shareholders is limited to the amount they have invested in the company’s shares. Personal assets of shareholders are generally not at risk in case of company debts or liabilities.
Separate legal entity:
A company having private limited company registration in Chennai is considered a separate legal entity from its shareholders. It can own assets, enter into contracts in its own name. This distinction ensures that the company’s affairs are separate from those of its owners, providing protection and stability to the business.
Minimum capital requirement:
Unlike in the past, there is no minimum capital requirement for the formation of a private limited company in India. The company can be started with any amount of capital as decided by the promoters or shareholders.
Perpetual succession:
A company with private limited company registration in Chennai has perpetual succession, meaning its existence continues even if the shareholders or directors change. The company has an independent existence and is not affected by the death, resignation, or insolvency of its members. This ensures continuity operation of company.
Share transferability:
Private limited companies have limitations on the transfer of shares. Shareholders can transfer their shares to others, but it is subject to the provisions specified in the company’s articles of association. This restriction ensures that ownership remains within a limited group of individuals.
Directors and management:
A company with private limited company registration in Chennai must have a minimum of two directors, with at least one director being a resident of India. Directors are responsible for the management. They are appointed by the shareholders and can be individuals or nominee directors from other companies.
Statutory compliances:
Private limited companies are necessary to comply with statutory obligations. These include filing annual financial statements, holding annual general meetings, maintaining proper books of accounts, and complying with tax regulations. Compliance with these obligations helps ensure transparency and accountability in the company’s operations.
Separate taxation:
Companies with private limited company registration in Chennai are separate taxable entities. They are subject to corporate tax rates and are required to file income tax returns annually. The profits of the company are taxed separately from the personal income of its shareholders. This can provide tax planning opportunities and benefits for the shareholders.
Funding and investment:
Companies with private limited company registration in Chennai can raise funds by issuing shares to investors. This allows for equity financing, where investors become shareholders and provide capital to the company. Additionally, private limited companies can also borrow funds from banks and financial institutions based on their creditworthiness.
Private limited company without share capital
In India, a private limited company without share capital is a specific type of business entity that can be formed under the provisions of the Companies Act, 2013. Unlike a traditional private limited company that has share capital, this unique type of company does not have an authorized share capital or issue shares to its members. Instead, the members or subscribers of the company undertake to contribute a specified amount towards the company’s activities.
Here are the key aspects and characteristics of a private limited company without share capital in India:
Limited liability:
Similar to other forms of companies, a private limited company without share capital offers limited liability to its members. The liability of the members is limited to the amount they undertake to contribute to the company, which is typically mentioned in the memorandum of association.
Non-profit orientation:
Companies having private limited company registration in Chennai without share capital are generally established for non-profit purposes, such as promoting art, science, religion, education, charity, or any other socially beneficial activities. The primary objective is not to generate profits or distribute dividends to the members.
Guarantee mechanism:
Instead of shares, members of a private limited company without share capital give a guarantee. Each member undertakes to contribute a specified amount in the event of the company’s winding up or liquidation. The amount of guarantee represents the maximum liability of each member.
Membership:
Members of a private limited company with private limited company registration in Chennai and without share capital are referred to as “guarantors” or “members by guarantee.” They do not hold shares or have a shareholding in the company. The number of members can vary, but the minimum requirement is usually three.
Management and governance:
Similar to a traditional private limited company, the management and governance of a company without share capital are carried out by directors. The directors are appointed or elected by the members and are responsible for the day-to-day operations and decision-making of the company.
Conclusion
A private limited company registration in Chennai offers several features and advantages, including limited liability, separate legal entity, perpetual succession, share transferability, and tax benefits. These features make it an attractive form of business entity for entrepreneurs and investors looking to establish and grow their businesses in India.
