Setting up of Private Limited Company

1. How many people are required to start a private limited company?

There should be at least 2 people to start a private company in India.

2. Should both of them be Indians?

Not necessary. Even foreign nationals or only foreign nationals can also start a company in India.

3. Whether any resident (local) person required to start a company?

A company will necessarily have 2 shareholders and 2 directors. The shareholders can be the directors. However, any private company should have one local resident person (those who have lived over 180 days in the previous year in India)

4. If both shareholders are foreigners, how will they find a local director?

Normally, foreign companies will appoint their senior manager or country head of India as their local resident director

5. How much time is required to set up a Private Limited company?

The whole process of setting up a company may take around 15-20 working days. The process involves submitting required documents to the Ministry of Corporate Affairs (MCA), approval from MCA at two levels (name approval and incorporation). So, it is difficult to predict the exact timeframe, but if all the relevant documents are accurately submitted and if the workload at MCA is reasonably less, one can get the incorporation done, even within a week.

6. How much will it cost to register a private limited company?

The cost includes the fee, stamp duty and professional fee of a company secretary. The fee to MCA depends upon the capital of the company. For a minimum share capital of Rs.1 Lakh, the total cost of incorporation will be in the range of Rs.25, 000

7. How much income tax a company has to pay?

At present (FY 2015-16) the corporate tax in India is 30.9% on net profits (surplus).

8. If a company declares dividend to shareholder, are any taxes to be paid?

Yes. The appropriation of profits in the form of dividend to shareholders attract a tax called Dividend Distribution Tax (DDT) at 17.65% (FY 2015-16)

9. Can you broadly explain the process of incorporating a company?

Once you decide to set up a company, chose a unique name (which has to be approved by MCA), obtain Digital signature and Directors Identification Number (DIN) for directors, file incorporation documents such as Memorandum and Articles of Association, declarations and forms with MCA. After verifying the documents, MCA, the registering authority issues Certificate of Incorporation.

10. How to choose a unique name?

MCA has issued guidelines for choosing a name. Your name should not be identical or similar to existing name registered under MCA and Registrar of Trademark. Secondly, name should speak about the nature of business (atleast one word related to the objective of the company). You can read the entire guidelines here.

11. Once I get incorporation certificate, can I commence the business?

You can, subject to obtaining post-incorporation registrations such as Permanent Account Number (PAN) from Income Tax department, Profession Tax from Commercial Tax department, Shops and Establishment registration from Labour department, etc. These registrations can be done within 8-10 days of incorporation.

Should you have any more doubts or queries, we would be glad to address them. Should you need our assistance incorporating a company, please write to team@simplifiedlaws.com

Find out what other registrations are required for Private Limited Company:

• Obtaining PAN and TAN Registration
• Profession tax registration – Karnataka
• Registration under Shops and Establishment Act
• Service Tax registration
• Registration under Karnataka VAT
• Obtaining Import Export Code (IEC)
• Who has to register under Employee Provident Fund (EPF)
• Who has to register under Employee State Insurance (ESI)

You may also interested to check other options of  entity registration before starting a business:

• Proprietary Firm
• Partnership Firm
• Limited Liability Partnership Firm (LLP)
• Private Limited Company
• Branch Office of a Foreign Company
• Subsidiary of a Foreign Company

Please follow and like us: