Generally, we have misconceptions about the operations turnover and other criteria of private limited companies, as we consider them small. Also, we always misunderstand that a private limited company has only set up by family members. This is possible so as to shape their business into a legal entity we think. These are just some of the common misconceptions people make when choosing a business structure. Choosing a business structure is a strategic decision and such a decision is based entirely on the pros and cons; associated with a particular business model. The choice of a private limited company for the business model comes with its own convenience; which has led to the establishment of some large private limited companies in India.
Online Registration Procedure
1: Private limited Company registration needs to Apply for Digital Signatures (DSC)
2: Apply for Director Identification Number (DIN)
3: Application for name availability on MCA portal
4: Private limited Company registration needs the Approval of name and approval documents on MCA portal
5: Certificate of Incorporation, PAN, TAN issued
6: Proceed with rubber stamp, Common seal, bank account opening, share certificates, preparation of GST if required.
Benefits of private limited company registration
Limited Liability
A Private Limited Company is a lawful element in its own right, permitting the entrepreneur. This form has establishment to keep their resources separate from the actual business. This implies that the entrepreneurs aren’t dependent upon any close to home responsibility; as their work has attempted as a specialist for the organization, instead of as a person.
Tax benefits
Private Limited Companies have likewise burdened productive, paying 19% Corporation Tax on benefits; as opposed to the 20 – 45% Income Tax paid on sole dealer benefits. Likewise, as opposed to pulling out the entirety of the accessible benefits every year. And making good on more close to home assessment, one can hold assets inside the business. This is to pay for future operational development and expenses.
Through a Private Limited Company, one can likewise diminish the own Income Tax and National Insurance Contributions. This is possible by taking a blend of compensation and profits. On the off chance that one keeps the compensation beneath the NIC lower benefits limit, for instance, you will not be responsible for any Income Tax or Class 4 National Insurance on those profit.
Perpetual succession
Since a Company is a different Legal substance, according to law the organization continues existing even on account of death, indebtedness or chapter 11 of any of its individuals. The existence of the Company isn’t subject to the existence of its authors or its individuals.
Reputation
Exchanging as a limited organization assists with depicting an expert picture and upgrade your standing. This is because of the way that restricted organizations are significantly more firm observation than different constructions, with legal consistence commitments and revealing prerequisites set up.
This implies that enrolling as a public restricted organization can assist your business with drawing in new financial backers, access more freedoms, and rival different organizations in your area.
Separation between management and ownership
A private limited company isolates Management and Ownership and consequently, administrators are liable for the organization’s prosperity and are likewise liable for the organization’s misfortune. In the event that you discover anybody more fit to deal with the business, you can generally designate such individual as a Director who will be included and liable for the development of the organization. Also will be liable for the benefits you acquire as a Shareholder.
Some Legal documents
Investor agreement
In order to maintain and secure your important relationship with your investors, the investor agreement should be carefully crafted and include some key terms. An investor agreement can bring peace of mind to an investor that his or her investment interests are protected and that the funds of the company or investors will be transferred seamlessly and the interests of the founder are protected.
An investor agreement is an agreement that outlines the terms of an investment. The agreement should, of course, include very basic things, such as:
- Names and addresses of the parties
- The purpose of the investment
- Date of investment
- Structure of Investment
- Signatures of the parties
The terms of the investment should be clearly stated in the contract. This means that you must state exactly how much the investor is offering; and when the investment will be transferred to the company. The contract should also state the type of investment.
While most investments come in the form of cash, checks or wire transfers; sometimes investments come in the form of tangible assets. Added, the time it takes for an investor agreement to be valid should be the same time it takes for an investor to get ROI. ROI is return on investment (ROI).
Board Resolutions
A board resolution is a formal document that helps identify the role of corporate office fees. Also helps to identify the outcome of any opinions or decisions made by the company. Usually, it is written when a new member of the board is voted on.
But it has the usage when the company want to expand, hire, or let a large number of workers go; Sell shares; Buy any kind of intellectual property rights; And / or any other major decision that will significantly affect the company. Board resolutions can be found within board minutes, and provide an accurate record of decisions made at board meetings.
ESOP agreement
E.S.O.P. (Employee Stock Ownership Plan) refers to an employee benefit plan that gives employees an interest in ownership in the organization. Employee stock ownership plans had issue as direct stock, profit sharing plans or bonuses; and the employer has full discretion in deciding who can benefit from these options.
However, employee stock ownership plans are the only options that can be purchased. It can have the purchase at a certain price before the drill date. The company rules contain prescribed rules and regulations that the employer has the requirement to comply. It is possible with in order to provide their employees with stock ownership plans.
An organization gives ESOPs to its employees for purchasing a specified number of shares of the company. It is done at a fixed price after the option period (fixed number of years). Before an employee can use his or her option, he or she needs to go through a pre-determined vesting period; that indicates that the employee must work for the organization until one or all of the stock options are used.
