How to Create Private Limited Company

How to Create Private Limited Company is most commonly asked by Entrepreneurs, new Business Companies. Here is gross overview of rules and how to save money. In previous article, we discussed about the meaning of the word Entrepreneur. Either you are opening a new e-commerce website or have commercial highly earning blogs or have some idea to offer some services, it become apparent to you that, paying income tax as an individual no longer offers any advantage but adds hindrance. In this situations, how to create Private Limited Company or the decision whether a Limited Liability Partnership or Company will be better comes in mind. The next major thing becomes apparent is the cost – How to Create Private Limited Company becomes easy to answer for you, but you can understand the pricing for third parties differs a huge – you become unable to understand, why one is charging $800, another is charging $400 onetime for the setup of a Private Limited Company. The rules varies, the section number varies; but as always said – Basic Pattern remains the same, for any country.

Why to Create a Private Limited Company is Most Important to Understand than How to Create Private Limited Company

Usually there are few types of ownerships and company types :

1. Individual ownership
2. Limited liability company (LLC)
3. Limited liability partnership (LLP)
4. Private Limited Company (can have divisions according to the country)
5. Public Limited Company

All major industrialized countries or countries with high GDP has huge resource for providing knowledge to the newbies, like for India :

India, in business aspects, it is fully at par with with an industrialized country. If you are a resident of India, you’ll get astonished that, a Governmental website is so much informative versus other websites, from the above link. This difference is due to the fact – Governments virtually give a bit more importance to the citizens according to their capabilities and net payable tax. For fully industrialized countries, all citizens are valuable. for growing countries, the fund is limited, so plan of action is done on priority basis. Again, comeback to our main topic.

A private limited company must be appropriately incorporated with the Registrar of Companies (ROC). When you are opening a Private Limited Company, liabilities of the share holders are limited to the shares subscribed by them. A Private Limited Company has a separate legal identity. For example, I as a doctor prohibited to perform certain actions (just for example) which are morally and legally right for another resident of India. Our Private Limited Company is saving me from the laws. As in India, none can serve two jobs at the same time, I can be on leave from the company or can take leave. Furthermore, my earnings are getting divided – when net profit gets divided, normally the payable tax gets the minimum cutoff twice. This is only enjoyable for who has solid income from several sources. Obviously, Law prohibits the misuse of these advantages by individuals, otherwise professional like doctors, lawyers, specially in India, would open 3-4 companies and get a huge tax relaxation.

Obvious benefits of become a fully operating business in terms of funding, lending process becomes easy. Tracking of invoices, employees becomes easy. So, first decide, whether really you need to create a Private Limited Company or not.

Another reason to create company is to organize the business earnings by different members of the family. There are consultants who can give a better idea. Try consultancy from online sources – charge is constant and the efficiency is verifiable from online karma. Like fake Gurus, there are hundreds of fake consultants. It is better not to know than know a wrong.

Know that, for India, in certain States, the charge for primary working field of a company can vary hugely. It is possibly true for US too. Otherwise with minimal investment, a cheating company in the name of Financial Company could be established. You are a good person, but unfortunately the cheaters are always seeking the opportunity to rip off the innocents.

How to Create Private Limited Company from Scratch

Now, you have decided to create a Private Limited Company. The difference of fees becomes apparent. Online services are far better and offers the setup charge at lesser cost. Ultimately you have to outsource the minimum needs of a company :

1. Balance Sheet (per annum or Quarterly)
2. Paying Income Tax
3. Compliance with other Laws

There are usually separate bigger companies who handles these. As like for Domain and Hosting, I would recommend to use different service providers for different set of works. As we pointed before, if you opt for Domain and Hosting from the same B Grade company, there is enough chance, when you will want to change the Hosting, the domain name will take more time to get released due to ‘technical issues’. Thats why we recommend Domain and Hosting from separate companies. The above mentioned set (take it as B) can be taken via a local agency of different service provider while creating a Private Limited Company is via other online service (take it as A).

How to Create Private Limited Company : Avoiding the Cheaters

Most important. You can mark it as VVI (very very important). Take that, a service named TechnoFuzzBird (its an imaginary name) is providing service to form a private limited company. First you must do thorough Google search with these kind of key phrases :

1. TechnoFuzzBird Cheating
2. TechnoFuzzBird Cheat
3. TechnoFuzzBird Cheating Company
4. TechnoFuzzBird Consumer Compliant
5. TechnoFuzzBird Bad Service

If there are lot of peoples complaining, definitely you are not going to test their reliability sacrificing your money. If no significant result comes out, check :

1. Whether this TechnoFuzzBird is a new service (enough chance that you are going to be a victim)
2. Whether TechnoFuzzBird made at least few happy

Uncannily, people NEVER says good or leaves a good review for a good service – they expect this is what should be the result. When TechnoFuzzBird is a bad company, its easier to find out, because all comes to complain when got cheated. This is a kind of bias.

Now, coming to a gross list of steps :

1. Selection of type of the company
2. Selection of name for the proposed company
3. Applying for Directors Identification Number and Digital Signatures
4. Drafting of Memorandum and Articles of Association
5. Stamping, digitally signing and e-filing of various documents with the Registrar
6. Payment of Fees
7. Obtaining Certificate of Incorporation
8. Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form for obtaining the certificate of commencement of business
9. Obtaining Certificate of Commencement of business (in case of public limited companies for certain countries)
10. Creating Rubber Seal, Pad Etc.
11. Public Notice, if any.

You only need to do step 1 & 2 yourself, the service provider should do the rest. Naming is worst part – select, in order of preference, at least one suitable name upto a maximum of four to six names, ensure that the name does not resemble the name of any other already registered company. Otherwise they might sue against you. Do not disclose the desired name of the company to the service provider while doing initial inquiry.

By the way, you can close the company – know that part too. If there is too much issue (not for Business or Service part, but from being yourself ripped off in the middle by the so called service providers), close the company.