Why would you want to start a private limited firm?

There are a variety of factors entrepreneurs should take into consideration before selecting the kind of business entity they want to establish. The size and nature of the business and fund-raising, size, as well as other factors should be considered before selecting the right kind of business structure. Here are a few reasons to create an individual limited company.

Limited Liability:

One of the primary benefits of setting up a private LLC is the limited liability. The term "limited liability" means that there is a lower risk to financial risk from the investors in a company. Limited liability refers to the shareholders' are restricted to the capital put into the company.

For instance, suppose Sam made a $100,000 investment to create an LLC private. The risk is his initial capital of $100,000. Also, his loss cannot exceed the amount of Rs 100,000. The company will not be responsible for any loss that is beyond the initial amount of Rs 100,000.

Business Continuity:

Private companies have perpetual succession. What is perpetual succession? Shareholders could leave or go however, the business exists, The company will not be affected by the demise of any of its shareholders, or by the transfer of its shares to a different individual.

In an entity that is a partnership change in membership results in the dissolution of the existing partnership. In a private limited company, one shareholder can transfer his shares to a different and the company is operating.

Fund Raising:

Banks, financial institutions, and venture capital funds private equity funds lend their resources more readily to private limited companies than offering other kinds of business entities.

Banks tend to lend money to companies with limited assets because they can use the company's assets to secure the loan, Venture capital companies invest in a private limited corporation through the exchange of equity shares. This cannot be done in a partnership.

Click Here To Know More About Private Limited Company Registration in India

Transfer and Exits:

Limited companies are simpler to sell than partnerships. Ownership is represented through preference or equity shares and can be transferred without impacting the operations of the business.

Director's salaries:

There is no upper amount of salary that can be paid to directors. However, it is possible to set an on the salary payable to the partners of a partnership company following The Income Tax Act, 1961.

Basic Requirements To Register a Private Limited Company In India

1. Two shareholders minimum are needed to form the Private Limited Company in India. The shareholders could be a foreign person or a foreign corporation.
2. Two directors minimum are required, of which one must reside in India. Note that the minimum requirement is that the director is a resident in India. (Not Indian National) This means that any foreign national that is also an Indian resident is qualified. Indian Resident refers to anyone who has been on the territory of India for over 182 days during the preceding calendar year.
3. Foreign investment should be allowed in this industry.
4. Once the business is created and a bank account is opened. Foreign investment that comes to India is required to be disclosed to the Reserve Bank of India (RBI).

Documents that are required to sign up a private limited company:

If you're looking to register an entirely owned subsidiary, we will need the company's papers.

Foreign Company Documents:

• A registration document issued by a foreign business
• Memorandum and Articles of Association of the foreign company
• A board resolution authorizing the multinational company from abroad to make investments in India

Foreign Director:

• Passport
• Utility Bill
• Drivers License
• Passport Size photographs for directors (4 each)

Indian Resident Director:

• Pan copy is required to be submitted by the Indian Resident
• ID Proof - Driver's License/Passport/Voter's ID
• Address Documentation - Bank Statement/Telephone bill

Registered Office documents:

• Address Proof of Place where business is conducted
• The No Objection letter is from the property proprietor of the office
• It takes about 20-25 working days to finish your registration

FDI Reporting to Reserve Bank of India:

Each time a foreign business or an individual from another country invests money in India through the establishment of the business. Buying an existing company and submitting FDI reports to the Foreign Exchange management department or RBI is a requirement.

The foreign company or the foreign nationals investing in an Indian company is required to transfer money in foreign currencies to an Indian Bank account. When you transfer funds to the Indian Bank account you must choose the purpose code of "Investment" or "Equity investment" or something similar.

After the funds have reached the Indian bank the bank will issue the Foreign Inward Transfer Certificate (FIRC). We can then file an FC-GPR filing in conjunction with RBI.

Advance reporting must be submitted within 30 days of the day of the receipt of funds. And FC-GPR filing must be completed within 60 days of the date of receipt of the funds.

Private companies have perpetual succession. What is perpetual succession? Shareholders could leave or go however, the business exists. The company will not be affected by the demise of any of its shareholders, or by the transfer of its shares to a different individual.

One of the primary benefits of setting up a private LLC is the limited liability. 

Post Incorporation Licenses:

Once the business is registered it will need to obtain certain licenses based depending on the nature and size of the business. Below is a required license required for companies established with the city of Bangalore and Karnataka.

1. Karnataka Commercial establishments and shops Companies registered with Karnataka need to obtain this license through the ministry of labor.
2. Professional Tax enrolment: Every registered company must obtain this certification by the division of taxation for professionals.
3. The Employee Professional Tax (required only when the amount of salary to be paid is greater than 15,000 Rs per month to employees).
4. Import Export License (Required for imports (or exporting)).
5. The GST registration (Required when the company is involved in the export of goods or services or has a turnover greater than 20 lakhs in a year).