In this article, Jagmohan Rana discusses the Fees and Time Involved in Incorporating a Private Limited Company in India.
Being one of the fastest developing economies, India is home to millions of aspiring entrepreneurs. The majority of them desire to incorporate a registered company having a separate legal identity in the eyes of the law. From multiple options available like one person company, a public company, limited liability partnership and private limited, the option that is most preferred by the startups is a private limited company. This is due to numerous benefits associated with this business structure.
One major thing that refrains them from doing so is the confusion about the cost and time involved in private limited company registration. Today, with this article we will understand the time and cost involved in private limited company registration in India. To begin let us first understand the meaning of private limited company.
What is the private limited company?
Private Limited Company is a privately held business that can be incorporated with minimum 2 and maximum of 200 members. Some of the major benefits of the private limited company include limited liability, separate legal identity, the scope of foreign direct investment etc.
Features of private limited company
Some of the features of the private limited company-
Limit on members liability
In the private limited company, the liability of members is limited to their share only. Thus the members cannot be held responsible personally for meetings the liabilities of the company.
The private limited company formed is a completely distinct identity from its members in the eyes of law. Thus the life of the company never comes to end even when the life of members comes to end.
Number of directors
Only two directors are required to form the private limited company that makes it easier to form this form of company.
Separate legal identity
The legal identity of the company is completely distinct from its members. Thus a company can hold property in its name, Obtain trademark registration etc.
Factors affecting the cost of private limited company registration
The procedure of private limited company is almost same in every state. However, the cost involved in private limited company registration is different. Do you know why? This is because the stamp duty of every state is different that in turn make the cost of company registration variable in distinct states. Moreover, there are several other factors that impact the cost of private limited company registration. Below we have listed out certain factors on which the cost of company registration will depend-
- Authorized Share Capital of the company
- Number of Directors in the company
- Stamp Duty of the State where the company is proposed to be registered
- Charges are taken by professionals like CA’s or CS or Lawyers.
Now we will understand the step by step procedure of private limited company registration in India, the cost involved in it and the time taken at each step.
Digital Signature Certificate – To start the procedure of private limited company registration the directors and subscriber to the memorandum of the company are required to obtain the digital signature certificate. This is because in order to validate the documents filed electronically attaching a valid DSC is mandatory. One thing to be noted here is that Chartered Accountants or Company Secretary are not required to obtain DSC.
Cost – For one Digital Signature Certificate, the cost is 500 Rs. As minimum two members are required to register a private limited, total cost involved in acquiring DSC becomes 1000 Rs.
Time Taken – 1 day
Directors Identification number – After obtaining DSC the directors of the company is required to apply for director identification number. It is unique number issued by the ministry of corporate affairs that is mandatory required to be obtained by every person desiring to act as a director in any company.
Cost – For each DIN 500 Rs. is government fees. Just like DSC minimum, two DIN is required to be obtained by the company. Thus, the total cost involved in this step is 1000 Rs.
Time – 1 day
Obtaining Name Approval – If you desire to seek name approval in advance you can apply for it through Reserve Unique Name form. In this form, you can provide any two unique company’s name preferences. If you desire to get the name approval in one shot make sure to select the name as per the ministry’s guidelines.
Cost – The one-time cost of filing this form is only 1000 Rs.
Time took- 1-2 days
Filing of incorporation forms – This is the final and most crucial step in the process of company registration. The major cost and time of private limited company registration are involved in this step only. Factor that plays a major role in this step is the authorized share capital of the company. In this step the various forms like spice form, MOA and AOA are required to be filed. You can get the cost details for this part from the ministry of corporate affairs website by entering the authorized share capital amount of your company. In case you select SPICE from the drop down and then enter the share capital amount for registration, it will show you the cost for filing MOA, AOA.
Cost – As the exact cost will depend upon case to the case here we provide you the estimated cost for filing these forms and obtaining PAN and TAN of the company-
- Stamp paper and notary charges for affidavit- 200 approx.
- SPICE Form – No charges.
- Memorandum of association- 2000 approx. However, stamp Duty Charges depending upon the state of registration.
- The article of Association- 300 approx. However, stamp Duty Charges depending upon the state of registration.
- Permanent Account Number (PAN) of the company- 107 Rs. Approx.
- Tax deduction and collection account number- 63 Rs. Approx.
One important thing to be noted here is that this is the approximate government cost involved in the private limited company. The exact cost will vary from state to state and other factors.
In addition to the cost mentioned above the professional charges charged by the chartered accountant or the company secretary will also be added to the cost. That will make the cost of private limited company registration in India around INR 10,000/.