A Private Limited Company (Pvt Ltd) is the most popular business structure in India for startups and SMEs. Governed by the Companies Act 2013, it offers limited liability, separate legal existence, and ease of attracting investment while restricting public share transfer. It requires minimum 2 directors and 2 shareholders.
Key Features
- Separate Legal Entity: Company exists independently of its members; can own assets, incur debts, sue and be sued
- Limited Liability: Shareholders' liability limited to unpaid share capital
- Perpetual Succession: Continues to exist regardless of changes in membership
- Minimum 2 Directors, maximum 15 (unless special resolution passed)
- Minimum 2 shareholders, maximum 200
- Restriction on public transfer of shares
- Cannot invite public to subscribe for shares or deposits
Requirements for Incorporation
| Requirement | Detail |
|---|---|
| Minimum directors | 2 (at least 1 must be resident in India for 182+ days) |
| Minimum shareholders | 2 |
| Registered office | Must have a registered address in India |
| MOA and AOA | Mandatory constitutional documents |
| Minimum paid-up capital | No minimum (can be Rs. 1) |
| Name suffix | Must end with "Private Limited" or "Pvt. Ltd." |
Annual Compliance Calendar for Pvt Ltd
- April 30: MSME Form-1 (if applicable)
- June 30: DIR-3 KYC for directors
- September 30: AGM (within 6 months of financial year end); filing AOC-4 within 30 days
- October 31: ITR filing (audit required); MGT-7 within 60 days of AGM
- December 31: MGT-7/7A filing deadline
Advantages over Proprietorship and Partnership
| Feature | Pvt Ltd | Proprietorship | Partnership |
|---|---|---|---|
| Liability | Limited | Unlimited | Unlimited |
| Legal entity | Yes | No | No (except registered) |
| Investment (VC/PE) | Easy (issue shares) | Difficult | Difficult |
| Perpetual succession | Yes | No | No |
| Compliance | High | Low | Medium |
| Tax rate (company) | 22% (concessional) | Slab rate | 30% |
Common Mistakes to Avoid
- Not filing INC-20A (commencement of business) within 180 days
- Not maintaining statutory registers at registered office
- Missing DIR-3 KYC for directors (DIN gets deactivated)
- Not holding board meetings at prescribed intervals
- Paying directors without proper resolution
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Frequently Asked Questions
What is the minimum number of directors for a Private Limited Company?
Minimum 2 directors, with at least one being a resident in India (stayed 182+ days in the preceding calendar year).
What is the maximum number of shareholders in a Pvt Ltd?
200 shareholders (excluding present and former employees who hold shares). Above 200 shareholders, the company must convert to a Public Limited Company.
Is there a minimum capital requirement for a Private Limited Company?
No statutory minimum. The Companies Act 2013 removed the minimum paid-up capital requirement. Even Rs. 1 is sufficient.
What is INC-20A and when must it be filed?
Declaration of commencement of business filed within 180 days of incorporation. Without this, the company cannot commence business or borrow money.
What is the corporate tax rate for a Private Limited Company?
22% under the concessional regime (Section 115BAA) plus surcharge + cess. New manufacturing companies pay 15%.
When must a Pvt Ltd company hold its AGM?
Within 6 months of the financial year end — i.e., by 30 September for companies with 31 March year-end.
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