A Private Limited Company (PLC) is one of the most popular business structures for startups in India. It offers limited liability protection to its shareholders and is considered a separate legal entity from its owners. The Private Limited Company is ideal for businesses looking for formal recognition, external funding, and growth potential. It also enables greater credibility in the market.

Key Features of a Private Limited Company:

• Limited liability: Shareholders are only liable up to the amount of their shares in the company.
• Separate legal entity: The company is separate from its owners, allowing it to own property, enter contracts, and be sued.
• Minimum 2 directors and 2 shareholders are required (maximum 15 directors).
• Transferability of shares: Shares can be transferred among shareholders, but restrictions apply on public trading.
• Tax benefits: The company is taxed as a separate legal entity, and shareholders are taxed individually on their dividends.

How to Set Up a Private Limited Company for a Startup in India?

Step 1: Choose Your Company Name

• Select a unique name that is not similar to any existing company or trademark.
• Check name availability using the MCA’s RUN (Reserve Unique Name) service.
• The name should reflect your business and comply with the Ministry of Corporate Affairs (MCA) guidelines.

Step 2: Obtain Digital Signature Certificate (DSC)

• The DSC is required for signing the electronic documents.
• All directors of the company must obtain a DSC to file necessary forms on the MCA portal.

Step 3: Obtain Director Identification Number (DIN)

• Each director of the Private Limited Company needs to obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA).

Step 4: Draft the Memorandum of Association (MOA) and Articles of Association (AOA)

• Memorandum of Association (MOA): Defines the company’s objectives, scope of activities, and authorized capital.
• Articles of Association (AOA): Specifies the internal rules and regulations for the company’s operations, governance, and decision-making.

Step 5: Register the Company with the Ministry of Corporate Affairs (MCA)

• Apply for incorporation by filing the SPICe+ form (Simplified Proforma for Incorporating Company Electronically) on the MCA portal.
• Submit the MOA, AOA, proof of identity and address for directors, and the registered office address.
• Upon successful verification, a Certificate of Incorporation (COI) will be issued, and your company is officially registered.

Step 6: Apply for PAN and TAN

• After incorporation, apply for the company’s Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for tax compliance.

Step 7: Open a Business Bank Account

• Open a current bank account in the company’s name, using the Certificate of Incorporation, PAN, and other documents.

Step 8: Maintain Books of Accounts

• Ensure accurate record-keeping of the company’s finances, including income, expenses, and capital.
• File Income Tax Returns (ITR) annually and comply with other statutory filings, such as GST returns, if applicable.