Private Limited Company explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Nine out of ten businesses you deal with in India are private limited companies. Your landlord's building company. Your SaaS vendor. The startup that just raised a Series A.
Out of roughly 20 lakh active companies on the MCA register, over 96% are private companies. Public companies barely register by count.
So why does everyone pick this one structure? And is it right for you?
A private limited company is owned by 2–200 people, can't sell shares to the public, and gives you limited liability. No minimum capital. Audit is mandatory from day one. It's the only structure Indian investors will fund.
What makes a company "private"
The law defines it in Section 2(68) of the Companies Act, 2013. Strip away the legal language and a private company is one whose Articles of Association say three things:
- You can't freely sell your shares. Transfers need board approval, and existing shareholders usually get first refusal.
- Membership is capped at 200 people.
- You can't invite the public to invest. No advertisements, no public offers.
That's it. Those three restrictions are the definition.
Two details people get wrong
"By its articles" is not optional. A company doesn't become private because someone calls it private. Those three clauses have to actually be in your AoA. The standard articles at incorporation include them — the problem shows up later, when somebody amends the articles carelessly and the company quietly stops being private.
The 200-member cap is friendlier than it looks. Two people holding shares jointly count as one member. And employees who hold shares don't count at all — nor do ex-employees who kept their shares after leaving. So an ESOP-heavy startup with 180 outside shareholders and 60 employee-shareholders is comfortably within the limit.
No, you don't need ₹1 lakh to start
This one refuses to die.
The ₹1,00,000 minimum paid-up capital requirement was removed in 2015. There is no minimum today. You can incorporate with ₹10,000 of authorised capital if you want to.
What you should do is pick an authorised capital with some headroom, because raising it later means a resolution, a Form SH-7 and more stamp duty. A common setup: ₹10 lakh authorised, ₹1 lakh paid-up.
What you actually get
Your company is a separate person in law. It owns its own assets, signs its own contracts, and can sue or be sued in its own name. Your laptop and the company's laptop are legally different things.
Your liability is capped. If the company fails owing ₹50 lakh, creditors can't come after your house. Your exposure is limited to whatever is unpaid on your shares.
One caveat worth stating plainly: this protects you as a shareholder. It doesn't protect you as a director who breached their duties. Directors carry personal liability for things like unfiled returns, and "the company did it" is not a defence.
The company outlives everyone. A shareholder dies, exits or goes bankrupt — the company carries on. Shares pass to heirs.
You can raise money. This is the big one. Every term sheet in India — angel, VC, PE — is written for shares in a private limited company. Convertible notes, CCPS, liquidation preference, anti-dilution: all of it assumes share capital.
You can grant ESOPs. You can't in an LLP.
People take you seriously. Audited accounts filed publicly with the ROC give banks, landlords and enterprise clients something real to underwrite.
And what it costs you
Let's be honest about the other side.
Audit is mandatory from year one. Zero revenue? Still audited. This is the single biggest recurring cost difference versus an LLP, where audit only kicks in above ₹40 lakh turnover.
You file with the ROC every year, whether or not you traded. AOC-4 for the accounts, MGT-7A for the annual return.
Directors carry real personal exposure. Miss your annual filings for three straight years and every director is disqualified for five years — across every company they're involved in. That's not a fine you pay and forget.
Closing down is slow. Strike-off takes three to six months and costs ₹10,000 plus professional fees. A proprietorship you just stop.
Growing brings new obligations. Cross ₹4 crore paid-up capital or ₹40 crore turnover and you stop being a "small company" — which triggers a requirement to dematerialise all your shares within 18 months. That's an RTA, an ISIN from both depositories, and a half-yearly filing. It arrives quietly and it isn't cheap.
Private Ltd vs LLP: the honest comparison
| Private Limited | LLP | |
|---|---|---|
| Minimum owners | 2 members | 2 partners |
| Minimum managers | 2 directors | 2 designated partners |
| Share capital | Yes | No |
| ESOPs | Yes | No |
| Can raise VC money | Yes — the standard vehicle | Effectively no |
| Audit | Always | Only above ₹40L turnover |
| Annual filings | AOC-4 + MGT-7A | Form 8 + Form 11 |
| Board meetings | 4 a year (2 if small) | None required |
| AGM | Required | Not required |
| Tax rate | 22% + surcharge (Sec 115BAA) | 30% + surcharge |
| Compliance cost | Moderate | Low |
Pick a private limited company if you'll ever raise equity, want to give ESOPs, or need the credibility.
Pick an LLP if you're running a consulting practice or family business that will never take outside investment, and you'd rather not pay for an audit every year.
Two things people miss: the tax rate gap is real — 22% versus 30% matters a lot once you're retaining profits. And converting an LLP into a company later is a genuine transaction, not a formality. If there's any chance you'll raise money, start as a company.
What the law asks of you
Here's the full picture in one place. Each of these has its own guide.
In your first six months
- Appoint your auditor and hold your first board meeting — 30 days
- File Form INC-22 for your registered office — 30 days
- Issue share certificates to founders — 2 months
- File Form INC-20A after all founders have paid in — 180 days
That last one matters most. Until INC-20A is filed, your company legally cannot trade or borrow. Miss the 180 days and the Registrar can strike you off.
Every year
- Get audited, hold an AGM by 30 September
- File AOC-4 within 30 days of the AGM, MGT-7A within 60
- DIR-3 KYC for every director by 30 September
- DPT-3 by 30 June (yes, even if you've never taken a "deposit" — director loans count)
- MSME-1 twice a year if you owe small suppliers beyond 45 days
Whenever something happens Issue shares, transfer shares, change directors, move office, take a secured loan, amend your articles — each has a form and a 30-day clock.
Once you cross a threshold CSR at ₹5 crore net profit. Demat at ₹4 crore capital or ₹40 crore turnover. A full-time company secretary at ₹10 crore capital. Internal audit at ₹200 crore turnover.
The exemptions nobody tells you about
Private companies get a long list of relaxations that public companies don't. Interested directors can count towards board quorum. A related-party shareholder can vote on their own transaction. You can borrow beyond your net worth without a shareholders' resolution.
But there's a condition, and it's brutal.
Every one of those exemptions is available only if you're up to date on your AOC-4 and MGT-7A filings.
Miss one annual filing and you lose the entire set — not just one of them. Board decisions taken during that gap were taken without the exemption you thought you had.
Treat your annual filings as the price of everything else. Full list of exemptions here.
Key takeaways
- 2 members, 2 directors, no minimum capital. One director must be India-resident for 182+ days.
- 200-member cap — but employee shareholders don't count.
- Audit is mandatory from year one, even with zero revenue.
- The only structure Indian investors will fund. LLPs can't issue shares or ESOPs.
- INC-20A within 180 days or you legally can't trade.
- Every private company exemption depends on filing your annual returns on time.
Read next
- How to Register a Private Limited Company (SPICe+ Guide)
- Post-Incorporation Compliance: Your First 180 Days
- Annual Compliance Calendar
- Exemptions for Private Companies
- Pvt Ltd vs LLP vs Public Ltd
Disclaimer: Position stated as on 4 September 2026 under the Companies Act, 2013. Company law changes often and MCA due dates get extended by circular. Verify current requirements and take professional advice before acting.