LIMITED COMPANY

LIMITED COMPANY

A limited company is a business structure where the liability of its members (shareholders) is limited to the amount of their investment. It is a distinct legal entity from its owners, allowing it to enter into contracts, own property, and be sued in its own name. 

Private limited company (Pvt. Ltd.)

This is the most popular business structure for startups and Small and Medium-sized Enterprises (SMEs). Shares are not offered to the public and are held privately. 

Key features

• Limited liability: The liability of shareholders is limited to their shareholding, protecting their personal assets.
• Membership: Requires a minimum of two and a maximum of 200 members.
• Directors: A minimum of two directors is required.
• Separate legal entity: The company is a distinct legal person, separate from its owners.
• Perpetual succession: The company's existence continues regardless of the death or departure of any member.
• Share transfer: The Articles of Association restrict the transfer of shares.
• Suffix: The company's name must end with "Private Limited" or "Pvt. Ltd.". 

Public limited company (Ltd.)

A public limited company can offer its shares to the general public for subscription. Its shares can be freely traded on a stock exchange. 

Key features

• Shareholding: It can offer shares to the public and has a minimum of seven members with no maximum limit.
• Directors: A minimum of three directors is required.
• Raising capital: The company can raise large amounts of capital by issuing shares to the public.
• Shares: Shares are freely transferable on the stock exchange, offering high liquidity.
• Compliance: Public companies are subject to more stringent regulatory requirements and financial disclosure rules than private companies.
• Suffix: The company's name must end with "Limited" or "Ltd.". 

How to incorporate a limited company

The incorporation process is conducted online through the Ministry of Corporate Affairs (MCA) portal. The process is now largely integrated using the SPICe+ form. 

1. Obtain a Digital Signature Certificate (DSC): This is mandatory for all proposed directors to sign documents electronically.
2. Acquire Director Identification Numbers (DINs): All directors must have a DIN, which can be applied for through the SPICe+ form.
3. Reserve a name: Submit the proposed company name through Part A of the SPICe+ form for approval. The name must not be similar to any existing company.
4. File for incorporation: Submit Part B of the SPICe+ form along with the Memorandum of Association (MoA), Articles of Association (AoA), and other required documents.
5. Receive Certificate of Incorporation: Upon approval by the Registrar of Companies (ROC), the company receives its Certificate of Incorporation, along with its PAN and TAN.
6. File a Declaration for Commencement of Business (Form INC-20A): After incorporation, this must be filed within 180 days.