What you need to know to start your business as a private limited company?

After a fabulous response to my previous article ” are you starting your business and worried about what kind of entity to start with??”, here I am posting my new article, which briefs you about “what you need to know to start your business as a private limited company”

The first thing you need to do is, think of a suitable business name which suits your business or any name you are dreamt upon.

Once you are done with the name selection, a search for the desired name to be done in ROC site, and check its availability.

Once you find that the desired name is available, you can start the registration process for registering the company.

The key requirements for registering a private limited are as follows:

  • There must be minimum two share holders ( who put money into your business as a capital ) and two directors ( who run your business ). Interestingly , the two share holders can be directors as well.
  • The proposed directors need to have DIN ( director identification number ).
  • Atleast one proposed director should have DSC ( digital signature certificate ).
  • The minimum amount require to start a private limited company is Rs.1,00,000.00 and you can use the amount for running your business.

Additional registration needed for running the business ( in common ) are as follows:

  • Permanent Account Number (PAN)
  • Professional Tax registeration
  • under shops and establishment act
  • under Vat / service act ( as applicable)
  • Tax Deduction Account Number ( TAN)

It is always advised to approach a chartered accountant or a Cs to help in registering your company with in a short duration by following all the statutory compliance.

Are you starting your business and worried about what kind of entity to start with?

All you need to question yourself the following:

  1. The objective of doing the business?
    If the objective of doing your business is to “skim the cream” and make money immediately and wipe of the business – then Sole propriety business is best apt for it , if not, then go for a Corporate like Private Ltd or semi corporate like limited Liability Partnership (LLP).
  2. R u planning to do all by yourself or want to take the help of others?
    If You have good knowledge about the market of your product – then can go for sole proprietary concern, or if somebody is there to help you for it – then can go for Partnership or if you are looking for corporate identity the go for LLP/Private Limited company.
  3. Do you have sufficient own funds to start up or you have angel investors who can invest in your business?
    If you have sufficient own funds to run your business –go for sole proprietary concern, if you know any person to support – then go for Partnership or a LLP, if you have angel investors – then can opt for a private limited.

There is an important hidden parameter for any kind of an entity,i.e.,

All business runs on understanding. So you need to be clear on what is your work profile and the others for that we must have an agreement to be drafted.

  1. For a sole proprietary
    you are the boss – so, there is no requirement for any kind of agreement.
  2. For a partnership
    a partnership deed is to be drafted but the strength of deed is quite low in our economic conditions.
  3. For a private limited company
    share holders will have shares divided based on their contribution and can create job description.
  4. If you want a via media solution, can go for LLP it is still a partnership ,it does not have a disadvantage of having unlimited liability but has an advantage of corporate having limited liability.

Commonly raised questions:

Q) Is it simple to start a business?
A) Yes.
Q) How to start a sole proprietary concern?
A) Simple, put a name board and start your business, that it.
Q) What about all the registerations like VAT, PT, Shops and Establishment Act
A) Hire a Chartered accountant or a company Secretary to do it, being business owner, you need to concentrate on generating business.
Q) What is the right way to do a business (which entity suits me?)
A) Meet a right person to get a right advice.
Q) Is exit is difficult?
A) No, Exit is also as simple as Entry.