Director of a Private Limited Company

Nov 27, 2024
Private Limited Company vs. Limited Liability Partnerships

A director in a private limited company plays a crucial role in steering the business towards success while ensuring it operates within legal and ethical boundaries. They’re not just figureheads—they are the driving force behind the company’s growth and stability. In India, the role of private limited company directors is both powerful and essential. 

Beyond just compliance, directors also inspire and lead the team. They set the tone for the company's culture and vision, fostering an environment where employees feel motivated and valued. Their decisions can drive innovation, enhance productivity and ultimately lead to the company's success.

Table of Contents

Meaning of Director in Private Limited Company

In a private limited company, a director is an individual appointed to the board of directors, responsible for managing the company's affairs. Directors act on behalf of the company, making high-level decisions to steer the company toward its goals.  For example, appointing key executives, such as a CEO or CFO or approving budgets to support growth initiatives.

Be it any type of company, their role includes overseeing corporate strategies, managing financial risks and ensuring compliance with relevant laws. 

Directors are entrusted with fiduciary duties and expected to act in the company's best interest, as well as that of shareholders and stakeholders. They are key decision-makers and hold significant power in shaping the company's direction, whether in operations, business expansions or financial management.

In short, directors form the backbone of a company’s governance structure and are accountable for its overall performance.

Becoming Director in a Private Limited Company

To become a director in a private limited company, follow these steps:

Step 1. Obtain a Director Identification Number (DIN):

  • Apply for a unique DIN via the Ministry of Corporate Affairs (MCA) portal.
  • This is a mandatory requirement for anyone seeking an appointment as a director.

Step 2. Prepare Necessary Documents:

  • Gather proof of identity (such as a PAN card) and address (such as an Aadhaar card or utility bill).
  • Ensure all documents are valid and up-to-date for smooth processing.

Step 3. Submit Documents During Incorporation:

  • Provide the required documents as part of the company incorporation or appointment process.

Step 4. Appointment by Shareholders:

  • The company's shareholders formally appoint the director during a board meeting.
  • Ensure the appointment is in compliance with the company's Articles of Association.

Step 5. Register Appointment with Registrar of Companies (RoC):

  • The appointment must be officially registered with the RoC to complete the process.

Step 6. Understand Director Responsibilities:

  • Recognise that being a director comes with significant legal, financial, and operational responsibilities.

Private Limited Company Directors Responsibilities

A director in pvt ltd company fulfils various duties and responsibilities that ensure the company’s smooth operation and compliance with laws. Here are some company director duties:

  • Act within Powers

Directors must act within the authority of the company's Memorandum and Articles of Association, ensuring all actions are legal and authorised.

Example: A director of a manufacturing firm must seek board approval before signing a contract for a new supplier, as stipulated in the company’s Articles of Association.

  • To Promote the Welfare of the Company

Directors must always prioritise the company’s success, avoiding decisions that might harm its operations or financial standing.

Example: A director of a retail chain may opt to delay expansion plans during an economic downturn to ensure the company’s financial stability.

  • Exercise Personal Discretion

Directors are expected to use their judgment and discretion in decision-making, ensuring they make independent choices that align with the company’s interests.

Example: A director in a tech startup may choose to invest in a high-potential but risky innovation project after independently analysing market trends, even if other board members are hesitant.

  • Avoid Conflict of Interest

Directors must avoid situations where their personal interests conflict with the interests of the company, such as taking part in business transactions that may benefit them personally.

Example: A director owning shares in a vendor company must disclose this relationship and recuse themselves from decisions involving contracts with that vendor.

  • Make Independent Decisions

As a director, it’s crucial to maintain the ability to make independent decisions that are in the best interest of the company’s growth and long-term success. 

Example: A director may support a merger proposal after conducting an unbiased evaluation of the deal’s benefits, even if opposed by some stakeholders.

  • Crisis Management

During challenging times, directors must manage crises effectively, keeping the company’s long-term goals in mind and navigating risks judiciously.

Example: A director in a logistics company might quickly implement contingency plans during a supply chain disruption, ensuring customer commitments are met while minimizing losses.

The role of a director in a company is a balance of leadership, responsibility and ethics. Every decision you make impacts the company, and you must ensure that the company thrives and adheres to the law.

Types of Directors in Company Law

Private limited companies can have different types of company directors, each with specific roles and responsibilities. Major types of directors in a private limited company include:

  • Managing Director(MD)

The Managing Director (MD) is the highest ranking director responsible for overseeing the company’s daily operations and ensuring its goals and strategies are successfully carried out.

As the MD, this director holds significant decision-making authority and is responsible for setting organisational policies, managing resources and leading the team. They work closely with the board to align the company’s strategic initiatives with long-term objectives. 

The MD bridges the board and the company's operational team, driving performance and growth.

  • Whole-Time Director

A Whole-Time Director is a full-time employee dedicated to specific operational responsibilities within the organisation. Unlike non-executive directors, they are involved in the company's daily operations, overseeing areas such as finance, HR or marketing. 

Their role is to ensure smooth operational performance and to support the MD and board by managing specific functions and executing company policies. Whole-Time Directors are vital in implementing the board’s strategic decisions on a day-to-day basis.

  • Ordinary Director

An Ordinary Director is a member of a company’s board of directors, serving in a non-executive capacity. Their primary role is to attend board meetings, contribute to discussions, and participate in decision-making processes that shape the company's strategy and policies. 

Unlike executive directors or managing directors, Ordinary Directors are not involved in the day-to-day management or operations of the business.

  • Nominee Director

A Nominee Director is appointed to represent the interests of a particular stakeholder, often an investor or a lending institution. They serve on the board to ensure that the appointing party’s interests and concerns are considered in key company decisions. 

Nominee Directors may be particularly common in joint ventures or companies with external funding. Their responsibility is to maintain a balanced perspective in the boardroom, ensuring the investor or stakeholder’s views are addressed without compromising the company's broader interests.

  • Alternate Director

An Alternate Director is appointed temporarily to act in place of an absent director, usually one who is based abroad or unavailable for a period. The Alternate Director has the same powers and responsibilities as the original director and participates in board meetings and decision-making. 

This role ensures continuity in governance, allowing the company to maintain full functionality even when a permanent director is unavailable.

  • Professional Director

A Professional Director is an individual appointed to a company’s board based on their expertise, skills, and experience rather than their relationship with the company’s founders or shareholders. 

Typically, these directors bring specialised knowledge in areas such as finance, law, operations, marketing, or industry-specific expertise that adds value to the board’s decision-making process.

All the types of directors in a company bring specific expertise and focus, helping ensure a well-rounded leadership team.

Number of Directors in Private Limited Company

The number of directors in private limited company depends on the scale and needs of the business. The minimum directors in the private limited company can be 2. However, the maximum number of directors in a private company is 15. A smaller company may only need two or three directors.

It is important to balance the number of directors, as having too few can limit the diversity of opinions and skills, while too many can create inefficiencies in decision-making. 

When determining the optimal number of directors for a company, consider the following factors:

  • Company Size and Complexity

Larger or more complex companies benefit from more directors handling diverse functions and providing specialised knowledge in finance, operations and marketing.

  • Industry Requirements

Certain industries, especially those highly regulated (e.g., finance, healthcare), may require directors with specific expertise or certifications, potentially increasing the ideal board size.

  • Diversity of Skills and Perspectives

A well-rounded board should include directors with diverse skills, professional backgrounds and viewpoints, enhancing decision-making and innovation.

  • Corporate Governance Standards

For better governance and accountability, adding more independent or non-executive directors can help provide objective oversight and mitigate conflicts of interest.

  • Decision-Making Efficiency

Smaller boards may lead to quicker decision-making, while larger boards can become cumbersome; balance is key for smooth and effective operations.

  • Legal and Compliance Requirements 

Local law often sets minimum and maximum limits on the number of directors, so companies must adhere to these regulatory standards.

  • Cost Implications

Increasing the number of directors adds to costs (e.g., compensation, meeting expenses), so financial resources must be considered when expanding the board.

  • Growth Stage

Early-stage companies may need fewer directors, focusing on core founders, while scaling companies benefit from additional directors with strategic and operational experience.

So, the ideal number of directors depends on the company’s size, the industry and the areas of expertise required.

Company Director Residency Requirement

In India, one of the key legal director requirements for establishing a private limited company is that at least one director must be a resident of India. Under the Companies Act, a resident director is defined as someone who has spent at least 182 days in India during the preceding calendar year. 

This company director residency requirement serves multiple purposes:

  • To ensure local governance and effective leadership
  • As a safeguard against companies that may be established with little or no physical presence in the country, helping the government ensure that companies are genuinely rooted in the local economy. 
  • To enhance accountability and align the company’s operations with India’s regulatory framework, benefiting both the company and its stakeholders.

Conclusion

Directors in private limited companies play a critical role in steering the organisation toward growth and ensuring legal compliance. With increasing complexities in business operations, the responsibilities of directors are more significant than ever. 

As businesses grow and face new challenges, the role of directors will evolve, but one thing will remain constant: the need for both responsible and visionary leadership. Directors must continue to adapt, making informed decisions to lead their companies into the future.

FAQs on Directors in a Private Limited Company

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Can a person be a director in more than one company?

In India, under the Companies Act of 2013, a person can serve as a director in a maximum of 20 companies at once. However, there are limits within this cap—only 10 of these can be public companies. This rule aims to ensure that directors can effectively fulfil their responsibilities without being stretched too thin across multiple organisations.

Can a director be appointed without a DIN (Director Identification Number)?

No, a director in India cannot be appointed without a DIN. A DIN is mandatory under the Companies Act of 2013, as it uniquely identifies each director and is required for their appointment in any company. The DIN application is submitted to the Ministry of Corporate Affairs, and once obtained, it is used for all directorships and filings.

How does a director influence a company's culture?

A director plays a significant role in shaping a company’s culture by setting ethical standards, defining organisational values and leading by example. Directors influence company culture through the policies they approve, the leadership tone they set and their interactions with executives and employees. 

By encouraging open communication, promoting transparency and supporting employee development, directors can positively impact morale and align the company’s culture with its strategic goals.

Are company directors involved in day-to-day operations?

Generally, directors are not involved in a company's day-to-day operations; their role is more strategic and supervisory. They focus on high-level governance, setting long-term goals and ensuring that the company's management team is performing well. 

However, in smaller companies or startups, directors might take a more hands-on approach, becoming more involved in daily tasks and decisions due to limited resources or a smaller team.

Related Posts

How to Convert a One Person Company (OPC) to LLP in India

How to Convert a One Person Company (OPC) to LLP in India

As India's entrepreneurial ecosystem evolves, founders now have access to a range of legal business structures tailored to different growth stages and ownership goals. From sole proprietorships and partnerships to private limited companies and, more recently, One Person Companies (OPCs) and Limited Liability Partnerships (LLPs) are among the most popular. 

While a One-Person Company (OPC) is ideal for solo entrepreneurs starting small, many founders later seek more flexibility, lower compliance, and shared ownership, making a Limited Liability Partnership (LLP) an attractive alternative.

If you’re planning to scale or bring in partners, converting your OPC to an LLP could be the right move. This blog walks you through the concept, legal framework, and procedure for converting an OPC to an LLP in India.

Table of Contents

Limited Liability Partnership (LLP)

An LLP is a hybrid business structure that combines the benefits of a company (limited liability) with the flexibility of a partnership. Some key features include:

  • Minimum two partners required
  • Liability of partners is limited to their contribution
  • No minimum capital requirement
  • Fewer compliance requirements than a company
  • Separate legal identity from its partners

One Person Company (OPC)

Introduced under the Companies Act, 2013, an OPC allows a single individual to operate a corporate entity. It offers:

  • Limited liability
  • Separate legal identity
  • Easier fundraising compared to a sole proprietorship
  • Greater credibility in business dealings

However, OPCs face limitations like:

  • Restrictions on fundraising
  • Mandatory conversion if turnover exceeds ₹2 crore or capital exceeds ₹50 lakh
  • Cannot have more than one member

Conversion of OPC to LLP

OPC conversion to LLP is governed by the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. While direct provisions for OPC-to-LLP conversion are not explicitly provided, companies (including OPCs) can be converted into LLPs under Section 366 of the Companies Act and the Second Schedule of the LLP Act.

Understanding the Legal Provisions for Conversion of OPC to LLP

The legal path for converting an OPC to an LLP involves:

  • Section 366 of the Companies Act, 2013 (deals with companies being converted into LLPs)
  • Second Schedule of the LLP Act, 2008 (provides the procedure for such conversions)
  • Form FiLLiP and Form 18 under the LLP Rules, 2009

Note: Prior approval from the Registrar of Companies (ROC) is mandatory.

Related Read: ROC Compliance Calendar for 2025–2026

Eligibility Conditions and Compliance Steps for Conversion

To be eligible for conversion:

  • Before conversion, the OPC must have at least two shareholders (LLPs require a minimum of two partners).
  • No active defaults in filing annual returns, income tax, or other statutory dues.
  • All secured creditors (if any) must give their consent.
  • The company should not have applied for winding up or struck-off status.

Compliance steps include:

  1. Holding a Board Meeting and passing a resolution for conversion
  2. Increasing the number of members/directors to meet LLP requirements
  3. Obtaining name approval through RUN–LLP or FiLLiP form
  4. Filing Form FiLLiP and Form 18 with ROC
  5. Executing an LLP Agreement within 30 days of incorporation

Looking to switch from OPC to LLP? Get professional help for a smooth and compliant business conversion with Razorpay Rize's LLP Registration Service.

Documents Furnished along with Form 18

Form 18 is the declaration for conversion and must be supported with:

  • Board resolution for conversion
  • Consent of all shareholders
  • Statement of assets and liabilities certified by a CA
  • List of creditors and their consent
  • Latest income tax return acknowledgement
  • Copy of PAN card and Aadhaar of all proposed partners
  • Address proof of the registered office of the LLP
  • NOC from the property owner (if rented office)

Procedure for Conversion of OPC to LLP

Here’s a step-by-step breakdown:

  1. Board Resolution: Approve the conversion plan and authorise directors to file the necessary forms.

  2. Increase Number of Members: Since an LLP requires at least two partners, the OPC must first induct another shareholder.

  3. DIN & DSC: Ensure all partners have a Director Identification Number (DIN) and Digital Signature Certificate (DSC).

  4. Name Approval: Apply for name reservation using RUN–LLP or through FiLLiP.

  5. Form FiLLiP Filing: File FiLLiP with ROC for incorporating the LLP.

  6. Attach Form 18: While filing FiLLiP, attach Form 18 with the required documents.

  7. Certificate of Incorporation: On approval, the ROC will issue a Certificate of Incorporation for the LLP.

  8. Execute LLP Agreement: Draft and file the LLP Agreement within 30 days.

  9. Apply for PAN, TAN & GST: Update statutory registrations with new LLP details.

  10. Close OPC Bank Account & Update Records: Close existing bank accounts of OPC and update stakeholders.

Frequently Asked Questions (FAQs)

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Register your One Person Company in just 1,499 + Govt. Fee

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Register your Business starting at just 1,499 + Govt. Fee

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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Why convert an OPC into an LLP?

Converting to an LLP offers greater flexibility, allows multiple partners, reduces compliance burden, and enables easier capital infusion, making it suitable for scaling beyond a single founder.

Is it mandatory to get creditor consent for conversion?

Yes. Obtaining written consent from creditors is required, as their rights could be affected during the conversion process.

Can an OPC with outstanding debts be converted into an LLP?

Yes, but all creditors must be informed, and their no-objection certificates (NOCs) must be secured. The LLP will assume all debts and liabilities of the OPC post-conversion.

Will the new LLP retain the OPC’s assets and liabilities?

Yes. Upon conversion, all assets, liabilities, obligations, and agreements of the OPC automatically vest in the LLP.

Do tax implications arise during conversion?

If the conversion meets certain conditions under the Income Tax Act (e.g., continuity of business and ownership), it can be tax-neutral. Otherwise, capital gains tax or other liabilities may apply. It’s advisable to consult a tax expert.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
 LLP Registration Fees: How much does an LLP cost in India?

LLP Registration Fees: How much does an LLP cost in India?

Starting a business in India is an exciting journey, but it begins with one crucial decision—choosing the right business structure. For entrepreneurs, particularly those leading small and medium enterprises (SMEs), a Limited Liability Partnership (LLP) has emerged as a favoured choice. 

This is due to its unique combination of the operational flexibility of a traditional partnership and the protective shield of limited liability that separates personal assets from business obligations.

An LLP is governed by the Limited Liability Partnership Act of 2008, which provides a robust legal framework and ensures a balance between flexibility and compliance. This structure is ideal for businesses looking to scale steadily while enjoying benefits like simplified compliance procedures and protection against unlimited liability.

In this blog, we’ll explain the various expenses associated with LLP registration online in India, including mandatory fees, additional charges, and professional costs. 

Table of Contents

How Much Does an LLP Cost in India?

The cost of LLP registration in India depends on multiple factors, including government fees, professional assistance, and other associated charges. Here’s a detailed breakdown of LLP registration fees:

1. LLP Registration Fees

The government fees for LLP registration are based on the contribution amount:

  • For a contribution of up to ₹1 lakh: ₹500
  • For a contribution between ₹1 lakh and ₹5 lakhs: ₹2,000
  • For a contribution between ₹5 lakhs and ₹10 lakhs: ₹4,000
  • For a contribution above ₹10 lakhs: ₹5,000

2. Digital Signature Certificate (DSC) Fees

At least one designated partner must obtain a Digital Signature Certificate (DSC) to sign and file documents online. Depending on the certifying authority, the cost of a DSC typically ranges from ₹2,000 to ₹4,000 per partner.

3. Professional Fees

While registering an LLP can be done independently, most entrepreneurs prefer to consult professionals (legal advisors or company secretaries) to ensure compliance. These fees can vary widely depending on the platform.

4. Stamp Duty Fees

Stamp duty is state-specific and varies based on the LLP’s contribution amount and the location of its registered office. On average, stamp duty can range from ₹500 to ₹5,000.

5. Name Reservation Fees

Reserving a unique name for your LLP costs ₹200 per application. This step ensures your chosen name complies with MCA guidelines.

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Other Costs Involved in Registering an LLP in India

Apart from the mandatory registration fees, here are additional LLP registration charges to consider:

1. LLP Agreement Drafting Charges

Drafting the LLP agreement, which outlines the rights, duties, and profit-sharing ratios of the partners, typically costs between ₹2,000 and ₹10,000, depending on complexity and professional assistance.

2. Notarisation Charges

Once the LLP agreement is drafted, it needs to be notarised. The charges for notarisation depend on the contribution amount and the state in which the LLP is registered, averaging ₹500 to ₹2,000.

3. Late Filing Penalties

Timely filing of required forms is crucial to avoid penalties. For instance, the late filing fee for Form 3 (LLP Agreement) is ₹100 per day of delay. Budgeting for timely compliance ensures you avoid these avoidable costs.

Professional Legal Charges Involved in Registering an LLP in India

When setting up a business, time is of the essence, and navigating the registration process can be overwhelming, especially for first-time entrepreneurs. While the government fees for LLP registration are standardised, the professional fees for legal and compliance services can vary depending on your required scope of assistance.

Engaging a qualified professional may feel like an added expense initially, but it can save you significant time, stress, and potential errors in the long run.

Here’s why hiring a professional for your LLP registration is worth the investment:

  • Drafting the LLP Agreement: The LLP agreement is more than just a legal document—it’s the backbone of your business operations. It defines the roles, responsibilities, profit-sharing ratios, and decision-making processes among partners. 
  • Name Reservation Assistance: Choosing the right name for your LLP can be tricky. The Ministry of Corporate Affairs (MCA) has stringent guidelines to ensure uniqueness and avoid duplication.
  • Digital Signature Certificate (DSC): A Digital Signature Certificate (DSC) is mandatory for designated partners to sign and file documents electronically during the registration process. Professionals assist in obtaining the DSC efficiently, ensuring you meet this requirement without delays.

At Razorpay Rize, we simplify the registration process by offering end-to-end support, covering everything from drafting agreements and obtaining DSCs to securing name reservations. 

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Our LLP package includes:

  • Company Name Registration
  • Digital Signature Certificate (DSC) tokens
  • DSC shipping & support
  • Designated Partner’s Identification Numbers (DPIN)
  • Certificate of Incorporation(COI)
  • LLP Agreement
  • Company PAN & TAN

With our team of experts managing the legalities, you can focus on building and growing your business confidently.

Frequently Asked Questions

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Register your Private Limited Company in just 1,499 + Govt. Fee

Register your business
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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
rize image

Register your Business starting at just 1,499 + Govt. Fee

Register your business
rize image

Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

How Much Will It Cost for LLP Registration?

LLP registration fees in India range from ₹7,000 to ₹25,000 or more, including government fees, DSC, professional assistance, and stamp duty. The exact cost depends on the contribution amount and location.

What is the Stamp Duty for LLP?

Stamp duty varies by state and contribution amount. It generally ranges from ₹500 to ₹5,000 or 0.1%–0.2% of the total contribution, depending on state regulations.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
Small Company Definition in India - Razorpay Rize

Small Company Definition in India - Razorpay Rize

The Ministry of Corporate Affairs (MCA) has revised the definition of a "Small Company" in India through the Companies (Specification of Definitions Details) Amendment Rules, 2022, effective from 15 September 2022. This amendment aims to reduce compliance burdens for small companies and support their growth in India's economic landscape. The updated criteria focus on the paid-up capital and turnover limits, making it easier for businesses to qualify as small companies under the Companies Act 2013.

Small companies play a vital role in India's economy, generating profits and creating employment opportunities. The revised small company definition is expected to benefit a larger number of businesses, fostering entrepreneurship and innovation across various sectors. By understanding the new criteria and the benefits offered to small companies, entrepreneurs can make informed decisions while setting up or managing their ventures.

Table of Contents

What are Small Companies?

Small companies, as defined by the Companies Act 2013, are private limited businesses with lower annual revenue compared to regular-sized companies. They follow the same registration process as private limited companies but have distinct financial criteria. To be classified as a small company as per the Companies Act, a business must meet the revised thresholds for paid-up capital and turnover.

The significance of small companies in India's economy cannot be overstated. They contribute to profit generation and job creation, making them essential drivers of economic growth. By providing goods and services to local communities and niche markets, small companies help foster inclusive development across the country.

The New Definition of Small Company

A small company is now defined as a non-public entity as per the Companies (Specification of Definition details) Amendment Rules, 2022, effective from 15 September 2022, if it meets the following conditions:

  • Small company paid-up capital should not exceed ₹4 Crores, or such higher amount specified, which should not exceed ₹10 Crores.
  • Small company turnover limit should not exceed ₹40 Crores, or such higher amount specified, which should not exceed ₹100 Crores.

It is important to note that certain companies are excluded from being classified as small companies, even if they meet the above criteria. These include:

  • Public companies
  • Holding companies
  • Subsidiary companies
  • Companies registered under Section 8 (non-profit companies)
  • Companies governed by any special act

The 2022 amendment significantly broadened the scope for small companies, enhancing their eligibility for benefits and simplifying compliance requirements, thus fostering growth in the small business sector in India.

Earlier Definition of Small Companies 2021

Prior to the 2022 amendment, the definition of small companies underwent changes in 2021. The thresholds for paid-up capital and turnover were revised as follows:

Criteria Threshold
Paid-up capital Maximum: ₹2 crores
Turnover Maximum: ₹20 crores

Comparing Small Company New Definition with Old Definitions

The Companies (Specification of Definition details) Amendment Rules, 2022, have further expanded the scope of small companies by increasing the limits for paid-up share capital and turnover. Here's a comparison of the key changes between the old and new definitions:

H3 - Criteria H3 - Old Definition (before 2021) H3 - Old Definition (2021) H3 - New Definition (2022)
Paid-up share capital Maximum: ₹50 lakhs Maximum: ₹2 crores Maximum: ₹4 crores
Turnover Maximum: ₹2 crores Maximum: ₹20 crores Maximum: ₹40 crores

The increased thresholds allow more firms to be classified as small companies and avail of the benefits provided under the Companies Act 2013. This expansion is expected to reduce compliance burdens and facilitate ease of doing business for a larger number of small businesses in India.

Benefits of Revised Small Company Definition

Exemption from Preparing Cash Flow Statements

Small companies are not required to include cash flow statements in their financial reports, simplifying their accounting processes.

Simplified Annual Filings

They can prepare and file an abridged annual return, reducing administrative workload.

Fewer Board Meeting Requirements: 

Small companies are mandated to hold only two board meetings per year instead of four, which lessens operational demands.

Impact on Audit Processes

  1. Auditors are not required to report on the adequacy of internal financial controls.
  2. There is no compulsory rotation of auditors, which can reduce costs and administrative burdens.

Compliance Ease 

A director can sign annual returns in the absence of a company secretary, further streamlining operations.

Reduced Penalties for Non-Compliance: 

This encourages small companies to focus on growth rather than worrying excessively about penalties.

These exemptions and relaxations aim to ease the compliance burden on small companies, allowing them to focus on their core business activities and growth strategies.

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Characteristics of a Small Company in India

Small companies in India have distinct characteristics that set them apart from larger enterprises. Some of the key traits include:

Ownership Structure 

Typically, small companies are privately owned entities, often structured as private limited companies, partnerships, or sole proprietorships. This ownership model allows for greater control and flexibility in decision-making but limits access to larger capital investments.

Simplified Compliance 

One of the key advantages of being classified as a small company is the reduced compliance burden. They benefit from exemptions, such as not needing to prepare cash flow statements, simplified annual filings, and fewer requirements for board meetings—only two are mandated per year. These measures significantly alleviate administrative pressures, allowing owners to focus on core business activities.

Auditing Requirements 

Small companies face less stringent auditing requirements. For instance, they are not obligated to rotate auditors or report on the adequacy of internal financial controls, which reduces costs and simplifies financial oversight.

Limited Resources and Workforce

Small companies generally operate with limited resources and a smaller workforce. They often employ fewer staff members, sometimes relying on a single individual or a small team to manage operations. This can lead to agility in decision-making but may also pose challenges in scaling operations or managing increased demand.

Restricted Market Reach

The market reach of small companies is typically confined to local or regional areas. They often serve niche markets or specific community needs, such as convenience stores in rural areas. This limitation can hinder growth opportunities compared to larger firms with broader market access.

How to Register a Small Company as per the Companies Act 2013?

To register a business online as a small company under the Companies Act 2013, follow these steps:

  1. Obtain Digital Signature Certificates (DSCs) for all proposed directors and subscribers
  2. Reserve the company name by submitting Part-A of the SPICe+ form
  3. File Part-B of the SPICe+ form along with required documents (Memorandum of Association (MOA), Articles of Association (AOA), Professional Declaration, Affidavits, Identity and Address Proofs, and Correspondence Address)
  4. Pay prescribed fees and stamp duty for the SPICe+ form, MOA, and AOA
  5. Obtain the Certificate of Incorporation from the Registrar of Companies (ROC) upon successful review of submitted documents

Matters to be included in the Board's Report for small companies:

  • The web address for the Annual Return (if available)
  • Number of Board meetings held during the year
  • Directors' Responsibility Statement as per Section 134(5)
  • Details of any frauds reported by the auditor under Section 143(12), except those reportable to the Central Government
  • Explanations or comments on any qualifications, reservations, or adverse remarks in the auditor's report
  • Summary of the company's current affairs and business overview
  • Financial summary or highlights
  • Material changes in the nature of the business after the financial year-end and their impact on the company's financial position
  • Changes in directorship during the year
  • Significant legal or regulatory orders affecting the company's going concern status or future operations

Synopsis of MCA Notification on Companies (Specification of Definition details) Amendment Rules 2022

The MCA has issued the Companies (Specification of Definition details) Amendment Rules, 2022, effective from 15 September 2022. The key amendments include:

  1. Rule 2 has been amended by substituting a new clause 2(1)(t), which specifies the revised definition of small companies.
  2. The thresholds for paid-up capital and turnover have been increased in the definition of a small company under the Companies Act 2013.

These amendments aim to provide relief to a larger number of businesses by classifying them as small companies and offering them various benefits and exemptions under the Companies Act 2013.

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Frequently Asked Questions

What is a small company as per the Companies Act, 2013?

A small company, as per the Companies Act, 2013, is a private limited company that meets the revised criteria for paid-up capital (not exceeding ₹4 crores) and turnover (not exceeding ₹40 crores) as specified in the Companies (Specification of Definition details) Amendment Rules, 2022.

What is a small company's limit?

The small company limit, as per the latest amendment, is a paid-up capital not exceeding ₹4 crores and a turnover not exceeding ₹40 crores.

What are the small companies in India?

Small companies in India are private limited businesses that meet the revised criteria for paid-up capital and turnover as specified in the Companies Act 2013. They play a crucial role in the country's economic growth by generating profits, creating jobs, and fostering entrepreneurship.

What is the definition of a small company, as per SEBI?

The Securities and Exchange Board of India (SEBI) defines a small company based on market capitalisation. Specifically, a small-cap company has a market capitalisation below ₹5,000 crores. This classification is distinct from the definition of a small company under the Companies Act 2013, which focuses on paid-up capital and turnover thresholds.

What is the size of a small-cap company?

As per SEBI's definition, a small-cap company has a market capitalisation below ₹5,000 crores. This classification is based on the company's market value and is different from the definition of a small company under the Companies Act 2013.

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