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Can A Start-Up Go For Private Limited Company Registration?

private company advantages and disadvantages

A startup could be a freshly established business that can go for private limited company registration, sometimes small, started by one or a bunch of people. What differentiates it from different new businesses is that a startup offers a brand new product or service that's not being given elsewhere within the same method. 

The keyword is innovation. The business either develops a brand new product/ service or redevelops a current product/service into something better. It will be robust to require a one-sided stance favoring either of the corporate entities once it involves the incorporation of a start-up in India. It fully depends on the priorities of the business once it involves choosing between a Private Ltd. and an LLP. 

Whereas a Private Ltd. Company offers a good scope to acquire investment, LLP gives more control and flexibility. Therefore, the entrepreneur should carefully weigh the pros and cons and judge which corporate entity would suit the business better at the time of incorporation, thus saving the value and time of converting from one entity to a different one when the initial registration.

Startups that have simply entered the sport or those planning on doing, therefore, begin their businesses by registering as private limited companies. Virtually 93 % of the companies incorporated in India are registered as private limited companies.

The government has introduced a brand new idea known as the One Person Company (OPC) for people WHO don't wish to share possession in the business. Associate OPC is additionally a private limited company

Entrepreneurs Must Focus On the Following Things 

A private limited company meaning is that one can't offer its shares to the general public because it is restricted. In a private company, the shares are privately held by the members or investors, it’s called the privately held company. PVT LTD is the suffix that follows the name of a Pvt. Ltd. company. 

The biggest advantage of a private company is that they're exempt from having to reveal its financial data to the general public. The liability of the members of a Private Limited Company is limited; it depends on the number of shares respectively they hold. Shares of Private Company cannot be publicly traded.

1. No minimum capital is required to register a company

Earlier, the shareholders had to pay at least Rs. One Lakh as a subscription amount to open a private limited company. Observing this amount, several startups selected to change to sole ownership

Now, the government. has modified the minimum capital criteria, currently, a company can be incorporated with ZERO capital.

Therefore, it can increase its capital in the future in line with the needs of the business.

2. Minimum two individual directors are required

A minimum of 2 directors are needed to incorporate a private limited company. Companies Act, 2013, has introduced the thought of one Person Company (OPC) private limited, within which one individual can begin a private limited company. Thus, if you propose to incorporate OPC, you'll be able to incorporate it with just one director.

3. Minimum of two shareholders is required

Shareholders are owners of the corporation and they have certain rights, including the appointment and removal of directors. A private company will be incorporated with a minimum of 2 shareholders. Again, with the introduction of OPC, an OPC will be incorporated with one individual as a shareholder.

The shareholders may be natural persons or corporations, including foreign corporations. However, just in the case of OPC Private Limited, only a natural person can be a shareholder of the company.

4. The same person can be both a director and a shareholder

An individual can hold the position of a director or/and as a shareholder in a private Limited company, however, a body corporate shareholder cannot hold the position of a director.

5. Maximum number of shareholders or members in a private company can be 200

To incorporate a private Ltd., a minimum of 2 shareholders is needed and a maximum of two hundred shareholders are allowed.

In the case of OPC Private Ltd, as the name says, there can’t be more than one investor or shareholders

Startup India Scheme:

The Startup India theme is an initiative of the govt. of India in 2016. The first objective of Startup India is the promotion of startups, the generation of employment, and wealth creation. Startup India has initiated many programs for building a sturdy startup scheme and reworking India into a rustic of job creators rather than job seekers. These programs will be controlled by the Department for Industrial Policy and Promotion (DPIIT).

Definition of “Startup”

Any company that falls under the below list of class is known as a “Startup” and is eligible to be recognized by the DPIIT to avail the advantages from the govt. of India.

Age of the corporate – The Date of Incorporation is not more than ten years

Type of Company – Incorporated as a Private Limited company or a Registered Partnership Firm or a limited liability partnership 

Annual Turnover – shouldn't exceed Rs.100 lakh for any of the financial years since its Incorporation

Original Entity – the corporate Entity should be formed originally by the promoters and will not be formed by splitting up or reconstructing existing business

Innovative & scalable – should have arranged for the development or improvement of a product, method, or service and/or have a scalable business model with high potential for the creation of wealth & employment

Benefits from DPIIT

Under the Startup India Initiative, the businesses that are registered under DPIIT are eligible to receive subsequent benefits:

Simplification and Handholding – Easier compliance, easier exit method for startups, legal support, fast-tracking of patent applications, and an internet site or website to reduce information asymmetry.

Funding & Incentives – Exemptions on income tax and Capital Gains Tax for eligible startups; a fund of funds to infuse additional capital into the startup scheme and a credit guarantee theme.

Incubation & Industry-Academia Partnerships – making various incubators and innovation labs, competitions, events, and grants.

Private Limited Company Registration Process:

The startup needs to register their company within the portal belonging to the Ministry of Labor and Employment “ShramSuvidha Portal”

Register at ShramSuvidha Portal and log in.

After successful   login, you have to click on that link which shows “Is Any of your establishment a Startup?”

Then the registration is often done by following the directions.

Application Procedure:

Step 1: Log on to Startup India Portal

Step 2: Enter your Legal Entity.

Step 3: Enter your Incorporation/Registration No.

Step 4: Enter your Incorporation/Registration Date.

Step 5: Enter the PAN Number (optional).

Step 6: Enter your full address

Step 7: Enter the details of the Authorized Representative.

Step 8: Enter the full Details of the Directors or Partners.

Step 9: Upload the required documents with Self-certification.

Step 10: Upload the Incorporation/Registration certificate.

Features of the Scheme

The following options create the scheme a stand-out factor:

New entrants are granted a tax holiday for 3 years.

The government has provided a fund of Rs. 2500 crore for startups, moreover as a credit guarantee fund of Rs.500 crore rupees.

Eligibility for Startup Private Limited Company Registration

• The company to be formed should be a private limited company or a limited liability partnership.

• It should be a new firm or not older than 5 years, and also the total turnover of the corporation should not exceed twenty-five crores.

• The corporations should have obtained approval from the Department of Industrial Policy and Promotion (DIPP).

• For the approval of DIPP, the company should be funded by an Incubation fund, Angel Fund, or Private Equity Fund.

• The firm should have obtained a patron guarantee from the Trademark Office or the Indian patent.

•It should have a recommendation letter by incubation. Capital gain is exempted from taxation under the startup India campaign.

• The firm should offer innovative schemes or products.

• Angel funds, Incubation funds, Accelerators, personal Equity Funds, and Angel networks should be registered with SEBI (Securities and Exchange Board of India).

What is a startup, a private limited company?

A Private Limited Company is the most well-liked form of a business entity among investors, a joint venture, or a 100 percent owned company in India. For the startups to own strong foundations and raise the funds in future private limits could be a viable choice. These are businesses that are privately controlled by individuals.

Startup Company Registration (LLP or PVT) in India: Is It Necessary: To Give the Startup a Legal Personality: A business is most trustworthy and appears credible once it's incorporated as a legal structure, an example as a private limited company. In addition, the name of the firm is also trademarked, to possess a unique identity in the market.

What are the benefits of signing up with startup India?

There are so many advantages startups receive under the Startup India Initiative. Nevertheless, to avail of those benefits, an entity is required to be recognized by the DPIIT as a startup.

Startups are allowed to self-certify their compliance with six labor laws and 3 environmental laws. This can be allowed for a total period of 5 years from the date of incorporation/registration of the entity. Startups are allowed a three-year tax exemption and also the best intellectual property services and resources exclusively engineered to assist startups shield and commercialize their IPRs.

What kind of business assembly should I select for my startup?

The most preferred business structures for a startup are private companies and LLPs. a private Ltd. is legally recognized and customarily favored by investors. However, it's stricter compliance and should have a higher value of incorporation.

What helps you to be a startup under the Startup India program?

• The firm should be a private Ltd. or a limited liability partnership

• The company remains a startup for the primary 10 years, post the date of registration. in the recent past, the Indian government modified that to ten years from seven years to provide opportunities and tax exemptions for businesses for an extended run

• The company remains a startup if the turnover per annum doesn't cross the Rs one hundred crore mark in any of the ten years. Once the corporation crosses the mark, it not remains eligible to be known as a startup. The mark of Rs one hundred crores to has been improved by the Indian government within the recent past from Rs twenty-five crore

 • The company should get approval from the Department of Industrial Policy and Promotion (DIPP)

• The firm should   be funded by Incubation Fund, Angel Fund, or a private Equity Fund

• A patron guarantee from the Indian Patent and Trademark workplace is important

• You should have a recommendation letter by incubation

• The firm should return up with innovative concepts and schemes

• All the details concerning the funding should be registered with SEBI (Securities and Exchange Board of India)

Private Limited Companies are startup friendly:

A Private Limited Company is the most well-liked form of a business entity among investors, a joint venture, or a 100 percent owned company in India. For the startups to own strong foundations and raise the funds in future private limits could be a viable choice. These are businesses that are privately controlled by individuals. They’re largely the most popular as a standard business in   India. Shareholders could operate the business themselves, or hire administrators to manage the corporation on their behalf. The most key points to be kept in mind for incorporating a private Ltd. The company is as follows:

• Private Limited Companies define a transparent distinction between shareholders and directors of a corporation whereas LLPs provide no clarification on these roles.

• The potential for raising venture capital and giving choices for attracting great talent by giving ESOPs (Employee option Plans) is offered for private corporations. However, no such possibility is offered for LLPs

• The time for the incorporation method is usually quicker for Private Limited Companies (7-10 days) compared to LLPs (15-20 days)

• LLPs even have a higher fine rate for late filing of documents as compared to private corporations.

• Private Limited Companies have the provision for perpetual succession that the company continues to perform as traditional after the death of a director. LLP, on the opposite hand, has no provision for perpetual succession. Director(s) need to dissolve the LLP if any of the aforementioned events occur. PLCs have Flexibility on possession and sharing of possession.

• LLPs cannot retain profit within the same means as a company limited by shares. LLPs cannot issue shares in any respect and so, growth and growth scope are incredibly restricted whereas inviting Private Limited Companies will raise humongous amounts of capital for additional growth.

• A Private Limited Company (PLC) has provisions for numerous tax deductions.LLPs can need to pay taxation whereas Private Limited Companies need to pay corporation tax. There are several provisions for tax deductions on corporation tax.

• Even though private Limited Companies (PLCs) have higher compliances and audit procedures these make sure the company stays in compliance with the rules. LLPs if they have a higher than 40 lakh Rupees turnover, are subject to an equivalent compliance necessity. Hence, constant auditing proves useful during this state of affairs. Prepares the Private Limited Company (PLC) for additional intensive auditing procedures.

• Exemptions: The private corporations are entitled to several exemptions for compliances similarly to alternative operations as per the Companies Act, 2013

• More significantly, a private Ltd. will use FDI (Foreign Direct Investment). Also, amongst all the company entities, a private Ltd. secures the foremost believability of the shoppers and therefore could be the simplest possibility for a start-up.

Incorporating a Private Limited Company

Let’s list down the essential steps of incorporating a Private Limited Company.

• Obtain DSC (Digital Signature Certificate)

• Apply for name Approval of the corporate

• File e-form INC-32 (SPICe) alongside e-MoA(INC-33) and e-AoA(INC-34)

The SPICe integrated e-form currently has provisions for the following:

• Obtaining DIN (Director Identification Number)

• Name Reservation

• PAN and TAN number

• Incorporation Certificate

Tips to Start Your Own Small Company and Maintain It:

(1) set up your plan- create an idea and create it simple. Highlight all the steps to be taken and succeed them efficiently.

2) Once you’ve planned what you need to do, search a lot regarding it. Learn what's to be done a lot of effectively and how much cost you can save in doing all the activities.

3) You would possibly wish to learn about the location of the corporation. 


1. Application of DSC & DIN Includes:

• Primary of all, the Directors and Subscribers have to be compelled to apply for Digital signature and DIN. A digital signature is a web signature used for filing and DIN refers to the administrator’s identification number issued by MCA. If the directors have already got DSC and DIN, then this step is usually skipped.

2. Name approval:

• You should offer 2 fully different choices for your name to MCA if that one goes to be elite. Names provided got to ideally be distinctive and implicational company business

3. MOA & AOA submission:

• Once the name is approved, one should draft a memorandum of association and Articles of Associate. MOA and AOA are filed with the MCA with the subscription statement and

4. Get an incorporation certificate:

• It typically takes 15- twenty-five days to form a private Ltd. company and find the incorporation certificate. Incorporation certification could also be a symptom that the company has been created. It in addition includes your CIN.

6. Apply for PAN, TAN, and Bank account:

• Then you want to use PAN and TAN. PAN and TAN are received in seven operative days. Post this; you’ll submit the Incorporation certificate, MOA, AOA, and PAN with a bank to open your bank account.


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