A private limited company offers limited liability to its owners and is well-suited for a small group of shareholders, accommodating up to 200 members while allowing flexibility in shares and shareholdings.
When opting for a Limited Liability Partnership (LLP), the partners themselves manage the business. Conversely, with a private limited company registration, directors and shareholders are distinct entities.
As your reliable legal advisor, Vakilsearch provides a cost-effective service for registering your company in India. We manage all legal procedures, ensuring compliance with regulations set by the Ministry of Corporate Affairs (MCA). Upon successful completion of the private limited company registration process, we furnish you with an Incorporation Certificate (CoI), as well as PAN and TAN documents. Armed with these, you can effortlessly open a current bank account and kickstart your business operations.
Types of Private Limited Companies
Private limited companies can be classified into three main categories based on the extent of shareholders' or members' liability:
- Company Limited by Shares: Shareholders' liability is confined to the nominal share value stated in the Memorandum of Association. This means that in the event of the company's liquidation, shareholders are liable to pay only the face value of their shares.
- Company Limited by Guarantee: Members' liability is restricted to the predetermined guarantee amount outlined in the Memorandum of Association. This obligation arises solely during the winding-up process. In this case, members agree to contribute a specific amount towards the company's liabilities in case of liquidation. However, they are not required to pay this amount during the company's regular operations.
- Unlimited Companies: Members of unlimited companies bear unrestricted personal liability for the company's debts and obligations. Despite this, they retain their status as a distinct legal entity, shielding individual members from direct lawsuit. This type of liability structure is less common and is often found in professional partnerships where members are willing to accept unlimited liability to maintain their professional independence.
It is essential to choose the appropriate liability structure when forming a private limited company, considering factors such as the nature of the business, potential risks, and financial stability. Consulting a legal or financial advisor can help you make an informed decision and ensure compliance with relevant regulations.