Requirements for a Private Limited Company

The most preferred format of company registration by most of the entrepreneurs in India is the Private limited Company. This is largely due to the flexibility in decision making and easy access to the banks and investors to raise funds, without too many restrictions. With such lucrative advantages, the Private Limited Company has become the most successful business structure in India.  

Here is a list of minimum requirements for the registration of a private limited company: 

1. Shareholders:

A Private limited company requires a minimum of two members. They may also be described as the subscribers or the members. A private company can have up to fifty shareholders, excluding:

• Any person engaged in the employment of the company 
• Any person, who has formally been engaged in the employment of the company, was the member of the company during the employment and has continued to be a member, even after the employment has ceased. 

Note: A Private company has the discretion to issue debentures to any number of people, the only condition being that an invitation to the public to subscribe to such debentures is prohibited.

2. Directors:

In a private limited company, there should be a minimum of two directors. In order to become a director, a DIN (director identification number) has to be obtained. It is important for either one of the directors to be a resident of India.  
Note: A person can be a director cum shareholder of the company

3. Share capital:

A Company must be formed with a nominal share capital, divided into shares of fixed amounts. The minimum authorized share capital should be a minimum of 1, 00,000 lac rupees. 

4. A Registered Business Name:

A designated company name is a crucial requirement for a private limited company. An application to the company register office has to be made, for the registration the company name. It is important to keep in mind that the company name should not be identical to an existing company, it should not be offensive or illegal in nature, and should be directly related to the nature and philosophy of the company. Bear in mind, the name of the company should be followed by the word 'Limited' or 'Ltd'.

5. A Registered address:

A registered address proof is a must, although, this may not necessarily be the place from where the business is generally conducted. In most of the cases, the address registered is that of the firm's solicitor or accountant. The primary reason for a registered address is for all official correspondence

Memorandum of association and articles of association:

These two documents encapsulate the soul of a company. While the former can be termed as the constitution of a company, the latter can be termed as the company’s code of procedure. 

6. Memorandum of Association:

It is the statement prepared by the subscribers during the company’s registration. It consists of the name of the company, the registered address, the object of the company, the liability clause, etc.   

7. Articles of Association:

This document primarily contains the internal regulation of a company. It defines the relationship of the company to its shareholders and the relationship between the individual shareholders.
Private limited companies have become a norm for startups in India. This is because it offers various benefits, in terms of flexibility of operation and ease of formation. In any other form of business, for example, sole proprietorship, partnership, etc, the risks run rampant which endangers your assets. 

Therefore, in today's setup, a private limited company is a lucrative option, as it offers greater stability, flexibility and limited liability.