Establishing a private limited company in India is a popular choice for entrepreneurs due to its distinct advantages in terms of limited liability, separate legal entity, and ease of doing business. In this article, we’ll explore the process of private limited company registration in India and delve into the unique features of Section 8 companies, also highlighting the difference between Section 8 and private limited companies.
Private Limited Company Registration
1. Understanding Private Limited Companies
A private limited company is a business structure that limits the liability of its shareholders. It has a separate legal identity from its owners and offers various benefits such as limited liability, easy transferability of shares, and perpetual succession. Here are the steps involved in registering a private limited company in India:
a. Name Approval:
Choose a unique name for your company and then apply for approval through the Ministry of Corporate Affairs (MCA) website.
b. Digital Signature Certificate (DSC):
Obtain DSC for the proposed directors as well as shareholders of the company.
c. Director Identification Number (DIN):
Then apply for DIN for the proposed directors.
d. Filing the Incorporation Form:
Submit the incorporation form with necessary documents, including the company’s Memorandum of Association (MOA) and also Articles of Association (AOA).
e. Certificate of Incorporation:
Upon approval, the Registrar of Companies (RoC) issues the Certificate of Incorporation, thus officially establishing the private limited company.
2. Post-Incorporation Formalities
Once the company is incorporated, certain post-registration steps must be followed:
a. PAN and TAN Application:
Then, apply for the company’s Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
b. Opening a Bank Account:
Open a bank account in the company’s name and then deposit the minimum required capital.
c. GST Registration:
If applicable, then register for Goods and Services Tax (GST) through the GST portal.
Section 8 Companies
1. Understanding Section 8 Companies
Section 8 companies, as per the Companies Act, 2013, are established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other charitable objective. The profits generated by these companies are utilized for promoting their objectives, and also the distribution of dividends to members is prohibited.
2. Differences Between Section 8 and Private Limited Companies
There are various differences between Section 8 and Private Limited Companies. Here is our summarised list of diffrences for section 8 company vs private limited company:
a. Objective:
- Private Limited Company: Firstly, they are primarily established for profit generation as well as commercial activities.
- Section 8 Company: Created for charitable or non-profit purposes.
b. Distribution of Profits:
- Private Limited Company: Additionally, in a PLC, profits can be distributed among shareholders.
- Section 8 Company: Profits are utilized to promote the company’s objectives; no distribution to members.
c. Limited Liability:
- Private Limited Company: Limited liability for shareholders.
- Section 8 Company: Limited liability, similar to private limited companies.
d. Government Approval:
- Private Limited Company: It requires approval from the Registrar of Companies (RoC).
- Section 8 Company: Needs approval from the Central Government.
e. MOA and AOA:
- Private Limited Company: Requires MOA and AOA submission during registration.
- Section 8 Company: Submits MOA and AOA with specific clauses ensuring non-profit objectives.
Additional Considerations
Corporate Governance:
- Private Limited Company: Adheres to standard corporate governance practices.
- Section 8 Company: Emphasizes adherence to ethical and transparent practices due to its charitable nature.
Tax Benefits:
- Private Limited Company: Taxed based on the applicable slab rates; eligible for various deductions as well as exemptions.
- Section 8 Company: Enjoys tax exemptions under Section 12AA as well as 80G of the Income Tax Act.
Compliance Requirements:
- Private Limited Company: Must comply with regulatory requirements under the Companies Act, 2013.
- Section 8 Company: Subject to stringent compliance norms due to its charitable objectives.
Fundraising:
- Private Limited Company: Can raise funds through equity and debt; suitable for commercial ventures.
- Section 8 Company: Relies on donations, grants, as well as government aid; limited avenues for fundraising.
Conversion Possibility:
- Private Limited Company: Can convert into a public company if desired.
- Section 8 Company: Limited options for conversion; additionally stringent regulations apply.
Conclusion
Thus, pvt ltd company registration in India provides entrepreneurs with a robust business structure, combining limited liability with the flexibility of operation. On the other hand, Section 8 companies serve as a vehicle for those driven by philanthropy and social welfare.
Also, understanding the nuances between private limited companies and Section 8 companies is crucial for individuals aiming to establish an entity that aligns with their business or charitable objectives. Whether for profit or non-profit, both types of companies play pivotal roles in contributing to India’s diverse and growing business landscape.
