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The definition of Private Company under the Act is provided here to understand its basics. Section 2 (68) of the Act defines a Private Company as under:

A Company having a minimum paid-up share capital as may be prescribed, and which by its articles,—
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred;
(iii) prohibits any invitation to the public to subscribe for any securities of the company

A private company is owned entirely by a small group of individuals providing capital. It is registered for agreed objects and owned by a group of members called shareholders and these are limited by shares for the company. "Limited by shares" means that the liability of the shareholders to creditors of the company is limited to the capital originally invested, so shareholder's personal assets are thus protected in the event of the company's insolvency, but any money invested in the company may be lost.

Components of Private Limited Company

  1. It is mandatory for all private companies to use the word private limited after its name.
  2. The minimum number of 2 members and a maximum number of 200 members are required as per the provisions of the Companies Act, 2013.
  3. The liability of each member or shareholder is limited to his/ her contribution. The personal assets of the shareholders are not at risk.
  4. The company keeps on existing forever, even in the case of death, insolvency, bankruptcy of any of its members.
  5. The minimum number of 2 directors in a private company can come into existence.
  6. It must have a minimum paid-up capital of Rs 1 lakh.
  7. The amount received by the company which is 90% of the shares and If the company is not able to receive 90% of the amount then they cannot commence further business. In the case of a private limited company, shares can be allotted to the public without receiving the minimum subscription.

Documents required

  • Share capital amount and proposed ratio for holding shares.
  • A short description of the company and the business.
  • Name of the city where the registered office of the company is located.
  • Ownership and sale deed (In case your own premise).
  • Identity proof of the Directors and Shareholders (PAN Card).
  • Address proof of the registered office (Electricity bill, telephone bill, etc.)
  • Address proof of the Director or the Shareholder (Voter ID, Passport, Driving license, etc.)
  • A duplicate copy of the latest electricity bill, telephone bill, or mobile bill for directors.
  • Occupation details of directors as well as shareholders.
  • Email address of the directors and shareholders.
  • Contact details of directors and shareholders.
  • Passport size photo of directors and shareholders.
  • In case the property is on rent then you need to submit a copy of the rent agreement with No Objection Certificate (NOC) from the landlord.
  • Affidavits for non- acceptance.
  • NOC for a change in the original subscribers of MOA.
  • MoA and the AoA subscriber sheets.
  • PAN Card of the company.
  • In case you are a foreign national subscriber then you need to provide Nationality proof.

Therefore, a Private Limited Company is less complicated compared to a Public company. It is comparatively less expensive and less time-consuming.

Procedure to register Private Limited Company

Once a name for the company is decided, the following steps have to be taken by the applicant: 

  • Application for DSC (Digital Signature Certification)
  • Application for Din ( Director Identification Number)
  • Name Availability of Company
  • Filing Memorandum of Association and Articles of Association Online
  • Application for PAN and TAN
  • Certificate of Incorporation
  • Opening Bank Account
  1. Application for DSC: The first step in making an application for company registration is applying for a digital signature certificate. A digital signature certificate is a legal document, which is used now days for verification of information. Usually the digital signature certificate is used for signing some electronic documentation. When incorporating a company, the first step is to apply for the DSC with the Ministry of Corporate Affairs.
  2. Application for DIN (Director Identification Number); Once you have applied for the DSC, it is crucial to apply for the director identification number. The DIN would indicate that the company when recruiting a director has met all compliances. The applicant for company registration has to apply for the director identification number for the company.
  3. Name Availability of the Company: Next step is to check the company name. This process is mandatory under company registration. When you check the name of the company, the portal will intimate you if the name is already choosen and not going against any provisions of intellectual property law in force in India. Checking the name availability of the company can be carried out online on the MCA portal.
  4. Filing Memorandum of Association and Articles of Association Online: The applicant for company registration has to file documents such as the memorandum of association and articles of association online. Filing these documents would provide legal certainty of formation of the company. This process must be carried out through the Ministry of Corporate Affairs Portal.
  5. Application for PAN and TAN: After all filings are complete, the applicant must consider applying for securing a PAN and TAN number.
  6. Certificate of Incorporation; Once everything is over, the MCA and ROC will review the application and if there are no issues, then a certificate of incorporation would be granted to the applicant. The certificate of incorporation is a legal document which provides some form of legal status to the company.
  7. Opening a Bank Account; After securing the certificate of incorporation, the applicant must open a bank account in the name of the organisation. This would be required for carrying out transactions on behalf of the company. Hence the applicant must open a corporate bank account.

Private Limited is Ideal for

  1. Businesses looking to expand or scale operations
  2. Start-ups looking to raise capital and issue ESOPs
  3. Businesses looking to convert their existing firm structure into private limited company

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DIN is a unique identification number required by a person to become a director of a company. DIN is issued by the Ministry of Corporate Affairs. It is similar to a PAN card number. DIN is to be mentioned in documents while appointing a person as a director.

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