Private Limited Company

As the name suggests, a private limited company is a privately-held business entity. It is held by private stakeholders. The liability arrangement in a private limited company is that of a limited partnership, wherein the liability of a shareholder extends only up to the number of shares held by them. The shareholders cannot be held liable beyond the value of the shares. The governing body for such a company is the Ministry of Corporate Affairs (MCA).

Section 2 (68) of the Companies Act, 2013 defines a private company as: “A Company having a minimum paid-up share capital as may be prescribed, and which by its articles,— (i) restricts the right to transfer its shares; (ii) except in case of One Person Company, limits the number of its members to two hundred; (iii) prohibits any invitation to the public to subscribe for any securities of the company.”

Features of Private Limited Company

1. Members– To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
2. Limited Liability– The liability of each member or shareholder is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
3. Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.
4. Index of members– A private company has a privilege over the public company as it don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
5. A number of directors– When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
6. Paid-up capital– It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time.
7. Prospectus– Prospectus is a detailed statement of the company affairs that is issued by a company for its public. However, in the case of a private limited company, there is no such need to issue a prospectus because this public is not invited to subscribe for the shares of the company.
8. Minimum subscription– It is the amount received by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business. In the case of a private limited company, shares can be allotted to the public without receiving the minimum subscription.
9. Name– It is mandatory for all private companies to use the word private limited after its name.

Taxation of Private Limited Company

Private Limited falls under two different categories one is a domestic company like in which there is no forging investments and another is Foreign Company means a company in which foreign investments are involved. Each company in India need to file its Income Tax return by the end of September, like for FY 2020-21 , return need to be filed by 30 September 2021. The filing of Income tax return is mandatory, means irrespective of turnover , profit & loss ITR need to be filed and ROC compliances need to be carried out. In Finance Budget taxation of Private Limited Company Corporate tax is dived in two category as Turnover above 400 Cr and Turnover below 400 Cr. Income Tax rate on private Limited company @ 25 % for midsize companies. Below is details of Corporate Income Tax Rate in India slab wise for FY 2020-21 AY 2021-22. Apart from income Tax there is surcharge applicable on Private Limited companies.

Annual compliances of Private Limited Company

• Private Limited Companies are required to file its Annual Accounts and Returns disclosing details of its shareholders, directors etc to the Registrar of Companies. Such compliances are required to be made once in a year.
• As a part of Annual Filing, the following forms are to be filed with the ROC:
• Form MGT-7 (Annual Return) : Every Private Limited Company is required to file its Annual Return within 60 days of holding of Annual General Meeting. Annual Return will be for the period 1st April to 31st March.
• Form AOC-4 (Financial Statements) : Every Private Limited Company is required to file its Balance Sheet along with statement of Profit and Loss Account and Director Report in this form within 30 days of holding of Annual General Meeting.

S No.	Particulars	Due Dates/Status
1	First Board Meeting	First Board Meeting
1	First Board Meeting	First Board Meeting
1	First Board Meeting	First Board Meeting
1	First Board Meeting	First Board Meeting