Learn Commerce Structures III: Private Limited Company
                     Learn Commerce 
Structures III: 
Private Limited 
Company
Introduction
A Private Limited Company is quite a proven and 
effective business model. It involves private ownership, 
with a limited number of shareholders(a maximum of 
200). These are small but successful business entities 
and are comparatively easy to achieve targets, for 
young entrepreneurs, after the BCom course. 
Although it’s somewhat open to all options, individuals 
from Commerce courses happen to make better jobs 
here, mostly due to additional Educational orientations 
to similar subjects, something other stream novices to 
this sector, are deprived of.
What Is A Private Limited 
Company?
As the name suggests, a Private Limited Company is a 
privately held business entity. It offers limited liability 
or legal protection to its shareholders. It is an 
intermediate business stature, shareholders in between 
a partnership and a collectively owned business 
company. 
A maximum of 200 shareholders can be a part of this 
institution. According to the definition, the shares of 
these companies are not publicly sold in Stock 
Exchange markets and can only be sold to the 
stakeholders in the business, implying a ground-level 
limitation in the liquidation of such a company.
Who’s The Owner Of A 
Private Limited Company?
Private limited companies are owned by one or more 
individuals (human or corporate), known as 
“members”. The company’s “shareholders” are those, 
who’s memberships are limited by shares, while 
“guarantors”  are those limited by guarantees. Beyond 
the technical terms, members of a company are often 
referred to as partners.
The companies are majorly owned and managed by the 
same set of people, where the ones managing the 
functioning of the system are called Directors, and the 
ones assisting them are called Secretaries. Together, 
the executive branch of a company is known as 
company officers.
What Are The Features Of 
A Private Limited 
Company?
A private limited company has the following features:
Membership: As per the provisions of the Companies 
Act 2013, from a minimum of two to a maximum of 200 
members, is what a private limited company is allowed 
to comprise of.
Limited liability: The liability of the members is limited 
to the number of shares directly held in their name.
Perpetual succession: Even in case of death, 
insolvency or bankruptcy of any of its members, the 
company continues to exist in the eyes of the law, 
thereby offering ways of forever existence.
Register of members: This database is not mandatory 
for a private limited company to maintain, unlike any 
public limited company.
A private limited company has the following features:
Directors requirement: The company is required to have 
a minimum of two directors, and then it can remain 
operational.
Paid-up capital: A private limited company must hold a 
minimum capital worth rupees one Lac, or such higher 
amounts, prescribed from time to time.
Prospectus: A private limited company is not required to 
issue a prospectus either, again, an absolute must in case 
of any public limited company. 
Minimum subscription: There are no such limits on this 
ground and the company is free to start a business 
immediately after its formation.
Name: The company must use the word private limited 
company at the end of its name.
What Are The Merits Of A 
Private Limited Company?
A private limited company has the following 
advantages
Flexible Investment: No minimum capital threshold 
is required for registration.
Separate legal identity: A private limited company 
is a separate legal identity in the court of law and 
doesn’t hold overlapping assets and liabilities with the 
directors.
Free and easy transfer of shares: Shares of the 
company are transferable by a shareholder to any 
other person and it is particularly hazel free.
FDI allowed: In a private limited company, 100% 
foreign direct investment is permissible in certain 
segments.
What Are The Demerits Of 
A Private Limited 
Company?
A private limited company has the following 
disadvantages:
Publicity restrictions: It arrests the transferability of 
shares by its articles.
No place in the stock market: Shares of these 
companies are not entitled to be sold in the Stock 
Exchange markets.
Is There Any Specific 
Employer Requirement In A 
Private Limited Company?
There is no such mandatory requirement, to appoint 
employees in a private limited company. Though 
informal, graduates from Commerce Courses, are likely 
to prioritize, in the selection processes.
What Are The 
Requirements For Private 
Limited Company 
Registration?
A private limited company has the following 
requirements for registration::
 A minimum of two adult persons are required to act 
as Directors of the company
 Minimum of 2 Directors and can have a maximum of 
2015 directors.
 One of the directors of a private limited company has 
to be an Indian Citizen and Indian Resident.
 The other director(s) can be a Foreign National.
 Two persons are required to act as a shareholder of a 
company
What Are The Documents 
Required For Registration?
The documents required for a private limited company 
are:
 ID proof: PAN card and passports of Indian and 
foreign directors, respectively
 Address proofs: Ration card or Aadhar card or 
driver’s license or voter ID
 Residence proofs: Bank Statement or electricity bill 
of the premise
 Notarized rental agreement
 NOC from the property owner
 A copy of the sale deed or property deed (for an 
owned property)
 Digital signature of any one director
What Is The Process Of 
Registering A Private 
Limited Company?
Once a name for the company is finalized, the following 
steps have to be carried out by the applicant: 
Step 1: Apply for DSC (Digital Signature Certificate).
Step 2: Apply for the DIN (Director Identification 
Number)
Step 3: Apply for the name availability.
Step 4: File the EMoa and EAOA with registration form to 
register the private limited company
Step 5: Apply for the PAN and TAN of the company
Step 6: Certificate of incorporation will be issued by RoC 
with PAN and TAN
Step 7: Open a current bank account on the company 
name
Conclusion
Merits and Demerits are the two sides of the same coin, 
likewise, for a private limited company. It is the most 
prevalent and recognized business entity, in the current date. 
This is majorly due to the higher degree of freedom, that it 
offers in setting it up and functioning.
There’s no time gap between these two, and that’s an 
incredible opportunity to encourage start-ups. After BCom. 
Courses, thousands of young minds sketch business plans, not 
always relevant or effective in the public domain. Whereas the 
private window offers a more homely than a professional 
working space, warming up young interns to gear up quickly.
Massive Private Limited Companies have prospered beyond 
extents, inspiring millions to execute their expertise. Some of 
these include Flipkart, Ola, Snapdeal, etc. It’s important to 
have directional thinking and appropriate strategies,  to suit 
the ideas.
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