Private Limited Company

A Private Limited Company (Pvt Ltd) is the most common form of incorporated business in India. It is a separate legal entity with limited liability for shareholders, restricted share transferability, and a minimum of 2 and maximum of 200 shareholders. It cannot offer shares to the general public.

What Is a Private Limited Company?

A Pvt Ltd company is registered under the Companies Act, 2013. Key features:
– Separate legal entity: the company can own property, sue and be sued, and enter contracts in its own name
– Limited liability: shareholders are not personally liable for the company’s debts beyond their investment
– Restricted share transfer: shares cannot be freely transferred without board approval
– Minimum 2 shareholders, maximum 200 (excluding employees who hold shares)
– Cannot issue shares to the public or list on a stock exchange

Incorporation Requirements

– Minimum 2 directors and 2 shareholders (can be the same 2 persons)
– At least one resident Indian director
– Registered office address in India
– MCA registration through SPICe+ form (Simplified Proforma for Incorporating Company Electronically)
– No minimum paid-up capital requirement (removed in 2015)

Taxation

Pvt Ltd companies pay corporate tax:
– 22% (plus surcharge 10% and cess 4%) under the new tax regime (Section 115BAA)
– 25% (plus surcharge and cess) for companies with turnover below Rs 400 crore under the old regime
– Effective tax rate: approximately 25.17% or 26%

Pvt Ltd vs LLP vs Public Ltd

| Feature | Pvt Ltd | LLP | Public Ltd |
|———|———|—–|———–|
| Shareholders | 2-200 | Partners | Minimum 7 |
| Listing | No | No | Yes (if applicable) |
| Compliance | High | Moderate | Highest |
| Equity fundraising | Yes (VC, PE) | Limited | Yes (IPO) |

Key Takeaways

– Pvt Ltd is the most popular structure for startups and growing businesses in India
– Separate legal entity with limited liability; cannot list on exchanges or offer shares to the public
– Minimum 2 directors and 2 shareholders; no minimum capital required
– Enables equity fundraising from VCs and angel investors through share issuance
– Higher compliance (annual filings, mandatory audit, board meetings) than partnership or LLP