Pharma Company Registration: How to Open a Pharma Company in India?

Aug 26, 2025
Private Limited Company vs. Limited Liability Partnerships

India is the world’s third-largest pharmaceutical market by volume and a key player in the global healthcare ecosystem. With its robust manufacturing base, cost efficiency, and innovation-driven approach, India has earned the reputation of being the “pharmacy of the world.” 

Both Indian pharmaceutical giants and foreign companies entering the market are shaping this growth trajectory, making the sector one of the most lucrative industries to invest in.

If you are an entrepreneur or investor looking to establish a pharmaceutical company in India, understanding the regulatory requirements and registration process is essential. 

This article provides a step-by-step guide on everything you need to know to register a pharma company in India, ensuring compliance while tapping into this high-growth industry.

Table of Contents

About the Pharma Company in India

A pharmaceutical company is an entity involved in the development, manufacturing, distribution, and marketing of medicines and healthcare products. Depending on the business model, pharma companies in India are typically classified as:

  • Manufacturing companies: involved in the production of drugs and medicines.
  • Marketing companies: focus on branding and distribution, often outsourcing manufacturing.
  • Wholesale businesses: supply medicines in bulk to retailers, hospitals, and distributors.
  • Retail businesses: run pharmacies and directly sell medicines to consumers.

India’s pharmaceutical industry has been expanding rapidly. As of 2025, it is valued at $55 billion and is projected to reach $120–130 billion by 2030. The government has also introduced several supportive measures:

  • 100% Foreign Direct Investment (FDI) allowed in greenfield pharma projects.
  • ₹15,000 crore PLI (Production Linked Incentive) scheme to promote domestic manufacturing.
  • Incentives for Active Pharmaceutical Ingredients (APIs) and medical devices to reduce import dependency.

With this growth potential, starting a pharmaceutical business in India is both a profitable and impactful opportunity.

Choosing the Right Business Structure for a Pharma Company

The first step in starting a pharmaceutical business in India is selecting the proper business structure. The choice depends on the scale of operations, funding requirements, and ownership preferences. Common structures include:

  • Limited Liability Partnership (LLP): Offers flexibility with limited liability.
    Private Limited Company (Pvt Ltd): Ideal for manufacturing and marketing businesses due to scalability and investor appeal.
  • Public Limited Company: Suitable for large-scale operations planning to raise funds from the public.
  • Indian Subsidiary of a Foreign Company: Allows foreign companies to establish a presence in India and leverage the growing market.

India ranks 3rd in the world by volume and 14th by value in pharmaceuticals, making it a preferred hub for domestic and international players. Choosing the right structure ensures smooth registration and compliance.

Eligibility for Registering a Pharma Company

Eligibility criteria are designed to maintain quality and compliance in the pharma sector. Key rules include:

  • The applicant must be legally competent to enter into a contract.
  • The company must appoint qualified directors and pharmacists, depending on the business type.
  • Proper compliance with the Drugs and Cosmetics Act of 1940 is mandatory.
  • Only individuals or entities with relevant pharmaceutical qualifications/experience can run such businesses.

Requirements for Registering a Pharma Company

Corporate & Structural Requirements

These are the standard legal requirements for forming a company under the Ministry of Corporate Affairs (MCA).

  • Directors and Members: The structure depends on your company type. For a Private Limited Company, a minimum of two directors and two members (shareholders) are required. The same individuals can hold both positions.
  • Director Credentials: Every proposed director must have a Digital Signature Certificate (DSC) for online document submission and a Director Identification Number (DIN), a unique identifier issued by the MCA.
  • Unique Company Name: Your proposed company name must be unique and not resemble any existing company or trademark. It must be approved and reserved through the MCA portal.
  • Registered Office Address: You must provide a physical address in India as the company's official registered office. Proof of address, such as a utility bill or rental agreement, is mandatory for verification.

Pharmaceutical & Technical Requirements

These are specific mandates from the Drugs and Cosmetics Act, 1940, enforced by state drug control departments, which are essential for obtaining a drug license.

Qualified Technical Personnel: 

You must employ qualified individuals to supervise the sale and distribution of drugs. The requirements vary based on the business type:

  • For Wholesale Business (Distribution): The operations must be supervised by a "Competent Person." This can be:
    • A Registered Pharmacist.
    • A graduate with at least one year of experience in dealing with drugs.
  • For Retail Business (Pharmacy): All sales and dispensing activities must be conducted under the direct supervision of a Registered Pharmacist.

Adequate Storage Premises: 

You must have a proper commercial space for storing medicines. The premises are inspected by a Drug Inspector and must meet specific conditions:

  • Minimum Area: Typically, a minimum of 10 square meters is required for a wholesale license. This can vary by state.
  • Proper Storage Facilities: The premises must be clean, well-lit, and equipped with necessary storage solutions like cupboards, racks, and, crucially, a refrigerator and freezer to store temperature-sensitive drugs like vaccines and serums.

Enjoy limited liability protection, easy fundraising, and better brand credibility. Register your Pvt Ltd company online with Razorpay Rize and focus on building your pharmaceutical business while we handle compliance.

How to Start a Pharmaceutical Company in India?

The incorporation process is now simplified through the SPICe+ (Simplified Proforma for Incorporating a Company Electronically Plus) form by the Ministry of Corporate Affairs. Steps include:

Phase 1: Business Incorporation

The first step is to register your business as a legal entity with the Ministry of Corporate Affairs (MCA). The modern SPICe+ (Simplified Proforma for Incorporating a Company Electronically Plus) form has streamlined this process significantly.

  • Get Director Credentials: All proposed directors of the company must obtain a Digital Signature Certificate (DSC) and a Director Identification Number (DIN). The DSC is an electronic signature used for filing documents online, and the DIN is a unique number assigned to each director.
  • Reserve a Company Name: You must apply for and reserve a unique name for your company. This can be done through the MCA portal's RUN (Reserve Unique Name) service or directly within the SPICe+ form.
  • Draft Foundational Documents: Two critical documents need to be prepared:
    • Memorandum of Association (MoA): This document defines the company's objectives and the scope of its business activities.
    • Articles of Association (AoA): This document outlines the internal rules and regulations for managing the company.
  • File the SPICe+ Form: This single, integrated web form is used to file for incorporation. It combines applications for the company name, DIN allotment, and issuance of important tax numbers like PAN and TAN.
  • Receive Certificate of Incorporation: Once the MCA approves your application, you will receive a Certificate of Incorporation. This certificate includes your unique Corporate Identity Number (CIN) and officially marks the legal birth of your company.

Phase 2: Securing Pharmaceutical Licenses

This is the most critical phase and is specific to the pharmaceutical industry. These licenses are granted by the Central Drugs Standard Control Organization (CDSCO) and State Drug Control Departments.

  • Drug License: This is the primary license required to deal with drugs and cosmetics. The type of license depends on your business model:
    • Manufacturing License: Required if you plan to manufacture drugs. This involves a rigorous inspection of your manufacturing facility to ensure it complies with Good Manufacturing Practices (GMP) and has the necessary technical staff and equipment.
    • Wholesale/Distribution License: Required for stocking, selling, and distributing drugs. This requires having adequate storage premises with proper refrigeration facilities and employing a registered pharmacist.
  • GST Registration: Before you can apply for a drug license, you must complete your Goods and Services Tax (GST) registration. The GSTIN is a mandatory requirement for the drug license application.

Phase 3: Brand and Tax Formalities

With your company and licenses in place, the final step is to protect your brand and manage your finances.

  • Trademark Registration: It is highly advisable to register your company name, logo, and the brand names of your pharmaceutical products. This protects your intellectual property and prevents others from using similar names.
  • Bank Account Opening: You can open a corporate bank account using the Certificate of Incorporation and other registration documents.

Get started with Razorpay Rize and complete your company registration online in just a few clicks. Fast approvals, 100% digital process, and expert support to make your pharma business official.

Documents Required to Register a Pharma Company

Here’s a checklist of essential documents required to open pharma company:

For Indian Directors/Shareholders:

  • PAN Card
  • Aadhaar Card
  • Passport-size photographs
  • Address proof (utility bill, bank statement)

For Foreign Directors/Shareholders:

  • Passport (notarised and apostilled)
  • Proof of overseas address
  • Photograph

For the Company:

  • Registered office address proof (rent agreement/ownership proof)
  • Utility bill of the premises (electricity/water bill)
  • MoA and AoA

Other Registrations Required for a Pharma Company

After incorporation, a pharma company must obtain additional registrations and licenses to operate legally:

  1. Drug License (under the Drugs and Cosmetics Act, 1940)


    • Manufacturing License
    • Wholesale License
    • Retail License
    • Loan License (for outsourcing manufacturing)
    • Import License (for foreign medicines)

  2. GST Registration – Mandatory for taxation and interstate sales.
  3. FSSAI Registration – Required if dealing with nutraceuticals or dietary supplements.
  4. Trademark & Patent Registration – Protects brand identity and intellectual property.
  5. Import Export Code (IEC) – For companies engaged in pharma exports/imports.

Frequently Asked Questions (FAQs)

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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

What is the minimum investment required to open a pharmaceutical company in India?

The minimum investment depends on the type of pharma business you plan to set up:

  • Retail pharmacy/wholesale distribution – ₹5–10 lakhs (primarily for licenses, shop setup, and inventory).
  • Small-scale manufacturing unit – ₹2–5 crores (including land, plant, machinery, and approvals).
  • Marketing company (without manufacturing) – ₹10–20 lakhs (mainly for licenses, branding, and distribution network).

The costs vary depending on location, scale, and whether you plan to export.

Which business structure is best for a pharmaceutical startup in India?

The Private Limited Company structure is considered the most suitable for pharmaceutical startups because:

  • It provides limited liability protection to the founders.
  • It is preferred by investors and VCs, making it easier to raise funds.
  • It ensures better compliance and credibility with regulators, suppliers, and customers.

For foreign companies, setting up an Indian subsidiary is often the best route to enter the Indian pharma market.

How long does it take to register a pharma company?

Registering a pharmaceutical company in India through the SPICe+ process generally takes 10–15 working days, provided all documents are in order.

Do I need separate licenses for manufacturing and marketing drugs?

Yes. The licenses are different depending on your business model:

  • Manufacturing License: Required if you are producing drugs and medicines.
  • Marketing License: Required for companies that outsource production but handle branding and distribution.
  • Wholesale/Retail License: Required for distribution or retail pharmacy operations.

So, you must apply for the specific license(s) that match your pharma company’s scope of operations.

How can I protect my pharma brand name and logo from competitors?

To secure your brand identity in the competitive pharma market, you should:

  1. Register a Trademark: Protects your brand name, logo, and tagline under the Trademarks Act, 1999.
  2. Patent Registration: If you’ve developed a new drug formula or process, apply for patents to secure exclusivity.

Copyright Protection: For marketing materials, packaging, and designs.

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.

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Related Posts

Addition and Removal of Partners in Partnership Firm

Addition and Removal of Partners in Partnership Firm

Adding or removing partners is a common occurrence in partnerships and Limited Liability Partnerships (LLPs). The process involves several legal and procedural steps that must be carefully followed. Changes in partnership composition impact the firm's registration, capital contribution, profit sharing, and management.

This article provides a comprehensive guide on how to add or remove a partner from a partnership, including the eligibility criteria, procedures, documentation, and key considerations. Whether you're looking to bring in a new partner or remove a business partner, understanding the legal framework is crucial.

Table of Contents

What is meant by Addition of Partner?

The addition of a partner involves introducing a new member into an existing partnership firm. This decision requires the unanimous consent of all current partners unless the partnership agreement stipulates otherwise. The incoming partner must possess the legal capacity to enter into a contract, as outlined in the Indian Contract Act, 1872. New partners bring specialised skills and industry expertise, enhancing operational efficiency. Their networks open doors to new business opportunities and markets. Overall, this flexibility enables firms to bring in fresh capital, skills, and expertise to support growth and expansion.

Process Of Addition Of Partners

The process of introducing a new partner involves several key steps:

  1. Agreement on terms and conditions: The existing and incoming partners must mutually agree on aspects such as profit sharing ratio, capital contribution, roles and responsibilities.
  2. Execution of deed of admission: A supplementary agreement containing the terms of admission should be drafted and signed by all partners, including the new entrant.
  3. Capital contribution: The incoming partner must bring in the agreed capital.
  4. Intimation to Registrar: Form 3 along with the prescribed fee should be filed with the Registrar within 30 days of the change.
  5. Notification to stakeholders: The firm must inform its bank, tax authorities, and vendors/suppliers about the new partner's admission.

Documents Requirement For Addition of Partners

The following documents are typically required for the addition of a partner:

  • A Digital Signature Certificate (DSC) is necessary for e-filing with the Registrar of Companies (ROC).
  • Form 3 must be filed to update the LLP agreement, reflecting the new partner’s inclusion.
  • Form 4 is used to notify the ROC about the appointment and obtain the partner’s consent.
  • A Limited Liability Partnership Identification Number (LLPIN) is essential for all filings.
    These documents ensure the smooth onboarding of a new partner while maintaining regulatory compliance under the LLP Act, 2008. of Admission/Supplementary Partnership Deed

Advantages Of Adding Partners in Partnership Firms

The introduction of a new partner offers several benefits to a partnership firm:

  • Capital infusion to support business growth and expansion
  • Fresh expertise and skills to enhance the firm's capabilities
  • Shared responsibilities and decision-making
  • Potential for increased profitability and market share

What is meant by Removal of Partner?

Partner removal in a partnership firm or LLP occurs when an existing partner exits, either voluntarily or by a decision of other partners, as per the partnership agreement. The process must comply with the Indian Partnership Act, 1932, which allows removal only if expressly stated in the agreement and with the consent of all partners (except the one being removed). In LLPs, removal must also adhere to the Limited Liability Partnership Act, 2008 and LLP agreement terms.

Why Removal of a Partner May Become Necessary?

The removal of a partner may become necessary due to several reasons:

  • Voluntary retirement or withdrawal
  • Breach of partnership agreement or trust
  • Incapacity or inability to perform duties
  • Misconduct or negligence detrimental to the firm
  • Insolvency or bankruptcy
  • Death of the partner

Steps Involved In Removing a Partner

The process of removing a partner typically involves:

  1. Serving notice: A notice of the proposed removal, specifying the grounds, should be served on the concerned partner.
  2. Considering reply: The concerned partner must be allowed to submit a response to the notice.
  3. Majority approval: Obtain at least 75% approval from the remaining partners through a resolution.
  4. Executing deed of retirement/reconstitution: The change in partnership should be documented through a formal deed.
  5. Intimating Registrar: Form 4 with the applicable fee should be filed with the Registrar within 30 days.
  6. Settlement of accounts: The outgoing partner's accounts should be settled as per the partnership deed or mutual agreement.

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Section 31: Introduction of a New Partner

Section 31 of the Indian Partnership Act, 1932, governs the introduction of a new partner into an existing firm. It stipulates that a new partner can only be admitted with the consent of all existing partners unless the partnership agreement provides otherwise.

Rights and Liabilities of a New Partner

Upon admission, the new partner becomes entitled to share in the profits and is liable for the losses and debts of the firm from the date of their entry, unless agreed otherwise. They have the right to access the firm's books of accounts and to participate in the management of the business. However, they are not liable for any acts of the firm before their admission, unless they expressly assume such liability.

Section 32: Retirement of a Partner

Rights of Outgoing Partner

Section 36: Right to Conduct a Competing Business

Unless restricted by an agreement, a retiring partner has the right to carry on a business competing with that of the firm and to advertise such business. However, they cannot use the firm's name or represent themselves as carrying on the firm's business.

Right To Share

The retiring partner is entitled to receive their share of the firm's assets, including goodwill, as per the terms of the partnership agreement or mutual understanding. They also have the right to share in the profits of the firm until the date of their retirement.

Section 37: Entitled to Claim

The outgoing partner has the right to claim their due share from the continuing partners. If not paid outright, they are entitled to interest at 6% per annum on the amount due.

Liabilities of Outgoing Partner

Section 32(3) and (4): Liability to the third party

The retiring partner remains liable to third parties for all acts of the firm until public notice of their retirement is given. They are also liable for any obligations incurred by the firm before their retirement unless discharged by agreement.

Section 32(2): Agreement of Liability

The retiring partner and the continuing partners may agree to discharge the retiring partner from all liabilities of the firm, but such an agreement is not binding on third parties unless they are aware of it.

Section 33: Expulsion of a Partner

A partner may be expelled from the firm by a majority of partners if such power is conferred by an express agreement between the partners. The power to expel must be exercised in good faith. Unless agreed otherwise, the expelled partner can claim the value of their share as if the firm were dissolved on the date of expulsion.

Section 34: Insolvency of a Partner

If a partner is adjudicated as insolvent, they cease to be a partner from the date of the insolvency order. Their share in the firm vests with the Official Assignee or Receiver appointed by the court. The firm is dissolved unless the solvent partners buy the insolvent partner's share and continue the business with proper intimation.

Section 35: Death of a Partner

In the event of a partner's demise, their legal heirs or executors step into their shoes. The firm dissolves from the date of death unless the partnership deed provides for continuity. The deceased partner's share in the firm's assets, goodwill, and profits is settled as per the partnership agreement or mutual understanding.

Section 38: Continuing Guarantee Revocation

The estate of a deceased or insolvent partner, an expelled or retired partner, is not liable for the firm's debts contracted after their death, insolvency, expulsion or retirement. A continuing guarantee given to a firm or a third party in respect of the firm's transactions is revoked as to future transactions by any change in the firm's constitution.

Conclusion

Changes in the composition of a partnership firm through the addition or removal of partners are significant events. While new partners can infuse capital and expertise, the exit of partners due to retirement, expulsion, insolvency or death can impact the firm's continuity and harmony. The Partnership Act provides a framework for inducting and removing partners. The terms of entry and exit should be clearly documented in the partnership agreement to minimise disputes. Intimations to the Registrar and third parties should be made promptly. With some foresight and planning, partnership firms can manage changes in their constitution smoothly and continue their business journey.

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

Register your business
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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 do I add and remove a partner in LLP?

A new partner can be added to an LLP with the consent of all existing partners. Form 4 along with the supplementary LLP agreement admitting the new partner should be filed with the Registrar within 30 days. For removing a partner, Form 4 along with the supplementary agreement removing the partner should be filed.

Can we add a new partner in LLP?

Yes, a new partner can be admitted to an LLP with the consent of all existing partners, unless the LLP agreement provides otherwise. The admission should be documented through a supplementary agreement and Form 4 should be filed with the Registrar.

How do you remove and add a new partner in a partnership firm?

The best name for your company is one that aligns with your brand identity, business operations, and legal requirements. It should be simple, professional, and free from misleading or offensive words.

Can you remove a partner from a company?

Yes, a partner can be removed from a partnership firm through retirement, expulsion, insolvency, death or dissolution of the firm, as per the provisions of the Partnership Act, 1932.

How do I remove a partner from a limited company?

A partner is associated with a partnership firm, not a limited company. To remove a director from a limited company, the procedures under the Companies Act, 2013 should be followed, which may involve passing a resolution in a general meeting.

How do I add a partner in a private limited company?

A private limited company has directors and shareholders, not partners. To appoint a director in a private limited company, the procedures laid down in the Companies Act, 2013 should be followed, which typically involve passing a board resolution and filing necessary forms with the Registrar of Companies.

How do I remove a partner from a general partnership?

A partner can be removed from a general partnership through retirement (with the consent of all other partners or as per the partnership agreement), expulsion (if such power is conferred by express agreement), insolvency, death or dissolution of the firm. The removal should be documented through a deed of retirement or reconstitution and intimated to the Registrar and third parties.

How do I add a partner to an existing partnership?

A new partner can be admitted to an existing partnership with the consent of all current partners unless the partnership agreement provides otherwise. The terms of admission should be agreed upon and documented through a supplementary agreement. The incoming partner must bring in the agreed capital contribution. Form 3 should be filed with the Registrar within 30 days of the change.

How do I add a partner in a private limited company?

A private limited company does not have partners. It has directors and shareholders. To appoint a director in a private limited company, the procedure laid down in the Companies Act, 2013 should be followed. This typically involves passing a board resolution and filing necessary forms with the Registrar of Companies.

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
Difference between Private Limited Company, OPC and LLP in India

Difference between Private Limited Company, OPC and LLP in India

Are you an aspiring entrepreneur ready to make your business official? If so, one of the critical decisions you'll need to make is choosing the right business structure. From Private Limited Companies (PLCs) to Limited Liability Partnerships (LLPs) to One Person Companies (OPCs), each structure offers its own set of advantages and considerations.

In this blog, we'll explore the nuances (features & differences) of these three popular business structures - Private Limited, LLP, and OPC—and provide insights to help you make an informed decision that aligns with your entrepreneurial goals.

Table of Contents

Difference between Private Limited, LLPs & OPCs

Private Limited Company Limited Liability Partnership One Person Company
Governing Act Governed by the Companies Act Governed by the Limited Liability Partnerships Act Governed by the Companies Act
Suitable For Financial Services, Tech Startups, Medium Enterprises Consultancy firms, Professional Services Franchises, Retail Stores, Small Businesses
Shareholders/Partners Minimum Shareholders - 2
Maximum Shareholders - 200
Minimum Partners - 2
Maximum Partners - Unlimited
Minimum Shareholders - 1
Maximum Shareholders - 1
(Maximum Directors can be 15)
Nominee Not required Not required One Nominee mandatory
Minimum Capital Requirement No minimum capital requirement, but it is often advised to set the authorized capital at INR 1,00,000 (One Lakh) No minimum capital requirement, but it is often advisable to consider an initial capital of INR 10,000 No minimum paid-up capital requirement exists. However, the minimum authorized capital required is INR 1,00,000 (One Lakh)
Tax Rates The basic tax rate, excluding Surcharge and Cess is 25% The standard fixed rate is 30% on their generated earnings. The applicable Tax rate would be 25%, excluding cess and surcharge
Fundraising Easier to raise funds from Investors Raising funds can be challenging Limited options for Fundraising
DPIIT Recognition Eligible for DPIIT recognition Eligible for DPIIT recognition Ineligible for DPIIT recognition
Transfer of Shares Shares can be easily transferred by amending AOA Transfer of partnership rights may require the consent of other partners and is generally more complex Transfer of shares isn't possible; it can only be done in case of transfer of ownership
ESOPs Can issue ESOPs to the Employees Unable to issue ESOPs to the Employees Unable to issue ESOPs to the Employees
Agreements Duties, Responsibilities, and other basic clauses outlined in MOA and AOA Duties, Responsibilities, and other basic clauses outlined in the LLP Agreement Duties, Responsibilities, and other basic clauses outlined in MOA and AOA
Compliances
  • More compliance costs
  • Mandatory 4 Board Meetings
  • Mandatory Statutory Audits
  • Mandatory filings includes Annual financial statements in form AOC-4 and annual returns in Form MGT-7, etc.
  • Less Compliance Costs
  • No Mandatory Board Meetings
  • Statutory Audits are not required if turnover is less than 40 Lakhs, or capital contribution is less than 25 Lakhs.
  • Mandatory filings include Annual financial statements in Form 8 and annual returns in Form 11.
  • Less Compliance Costs
  • Minimum 2 Board Meetings
  • Mandatory Audits
Foreign Directors/Partners NRIs and Foreign Nationals can be Directors NRIs and Foreign Nationals can be Partners No foreign directors are allowed
Foreign Direct Investment Eligible through Automatic route Eligible through Automatic route Not eligible for FDI
Mandatory Conversion No mandatory conversion No mandatory conversion If annual turnover exceeds Rs. 2 Crores or paid-up capital exceeds Rs. 50 lakhs, then mandatory conversion into a private limited company

Now that we've introduced the differences between these three types, let's explore their features and registration processes more thoroughly. This will help you determine which one is the most suitable for your business needs.

Private Limited Company: Features

In India, the Private Limited Company stands as the predominant choice for company registration, governed by the Companies Act of 2013 under the jurisdiction of the Ministry of Corporate Affairs (MCA). This structure is favoured by startups and businesses aspiring for growth and stability, owing to its adaptable ownership model and efficient management practices.

Outlined below are some key characteristics of a Private Limited Company:

1. Limited Liability

  • Shareholders enjoy limited liability, safeguarding personal assets from business debts.

2. Separate Legal Entity

  • Regarded as a distinct legal entity from its shareholders, allowing it to engage in contracts, own assets, and litigate under its name.

3. Ownership

  • Owned by shareholders who possess shares in the company, with ownership transfer facilitated through share transactions.

4. Management

  • Managed by appointed Directors, while day-to-day operations are overseen by management, with significant decisions often requiring shareholder approval.

5. Shareholders

  • Requires a minimum of two shareholders and can accommodate a maximum of 200.

6. Regulation and Compliance

  • Governed by the Companies Act and regulated by the Ministry of Corporate Affairs, mandating compliance with annual financial filings, general meetings, and statutory record maintenance.

7. Investment and Funding

  • Attracts investment and funding relatively easily due to its defined ownership structure and limited liability feature.

Private Limited Company: Registration in India

The Ministry of Corporate Affairs (MCA) has introduced a streamlined and online process for company incorporation known as Simplified Proforma for Incorporating Company Electronically Plus (SPICe+), comprising two parts: Part A and Part B.

The steps are as follows:

1. Step 1: Apply for DSC

  • Obtain a Digital Signature Certificate (DSC) from Certifying Agencies (CAs) with either one or two-year validity.

2. Step 2: Apply for Name Approval

  • Apply for name using SPICe+ Part A which facilitates 'Name Reservation' with the provision for two proposed names and one re-submission (RSUB).

Note: While simultaneous application for name approval (Part A) and Incorporation (Part B) through SPICe+ is feasible, only one name can be reserved.

3. Step 3: Apply for Company Registration & Other Applications

  • Following name approval, apply for Company Registration using SPICe+ Part B, which also includes the application for allotment of Director Identification Number (DIN), Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), etc.

4. Step 4: Apply for a Bank Account

  • Open a current account for your company to facilitate seamless financial transactions and business operations.

5. Step 5: File the Commencement of Business Certificate

  • Within 180 days of incorporation, file the Commencement of Business Certificate through Form INC-20A, which is a declaration submitted by the Director of the Company to the Registrar of Companies.

Upon approval of the SPICe+ Form, the Registrar of Companies (ROC) issues the Certificate of Incorporation, confirming the successful registration of your company.

The Certificate of Incorporation includes vital information such as the Company's name, registration number (CIN), date of incorporation, registered office address, and so on.

Example of CIN: U72200KA2013PTC097389

Read more about what each letter in a CIN signifies here.

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Limited Liability Partnerships: Features

A Limited Liability Partnership (LLP) is a business structure that combines features from both traditional partnerships and limited companies. And, LLPs are often favoured by professional services firms, small businesses, and ventures seeking the blend of partnership flexibility and limited liability protection.

Key characteristics of an LLP include:

1. Limited Liability

  • Partners in an LLP benefit from limited liability akin to private limited companies.

2. Separate Legal Entity

  • An LLP exists as a distinct legal entity from its partners, capable of owning assets, entering contracts, and engaging in legal proceedings independently.

3. Ownership

  • Partners own the LLP, with the ownership structure outlined in the LLP agreement. Ownership transfer typically requires consent from other partners.

4. Management

  • Managed by partners or a designated management team as specified in the LLP agreement. Decision-making is often collaborative, with each partner having an equal say.

5. Number of Partners

  • Requires a minimum of two partners, with no maximum limit.

6. Regulation and Compliance

  • Governed by the Limited Liability Partnership Act in India, featuring less stringent regulatory requirements compared to private limited companies. Compliance entails filing annual returns and maintaining statutory records.

7. Flexibility

  • Offers enhanced flexibility in internal management and decision-making processes compared to private limited companies.

Limited Liability Partnerships: Registration in India

Establishing a Limited Liability Partnership (LLP) as a legally recognized business structure involves several crucial steps. Here is a brief and comprehensive outline of the LLP registration process.

1. Step 1: Obtain a DSC

  • Obtain a Digital Signature Certificate (DSC) from Certifying agencies. To know more about the process, click here.

2. Step 2: Apply for Name Reservation

  • Reserve an LLP's name via the LLP-RUN form, overseen by the Central Registration Centre. Up to two names can be proposed.

3. Submit the FiLLiP Form

  • Fill out the FiLLiP form and submit it to the Registrar along with the Subscriber sheet and Director's consent (Form DIR-9).

4. Draft & File the LLP Agreement

  • File the LLP Agreement using Form 3 on the MCA portal within 30 days of registration.

Upon approval of the FiLLiP Form by the Registrar of Companies (ROC), you will receive the Certificate of Incorporation, which has important details such as the LLP's name, registration number (LLPIN), date of incorporation, registered office address, and so on.

Example of LLPIN: AAA-1234

{{llp-cta}}

One Person Companies: Features

One Person Companies (OPCs) present a unique business structure where a single individual can establish and manage a company. Combining aspects of a Private Limited Company and the advantages of Sole Proprietorship, OPCs cater to entrepreneurs and business owners who handle all ownership, operation, and management duties themselves.

1. Sole Ownership

  • An OPC is solely owned and managed by a single individual, referred to as the sole shareholder or member.

2. Limited Liability

  • Like other corporate structures, OPCs offer limited liability protection to the sole owner.

3. Separate Legal Entity

  • OPCs are recognized as separate legal entities independent of the sole owner. This legal distinction enables you to enter contracts, own assets, and participate in legal proceedings under your company’s name.

4. Perpetual Succession

  • Despite having only one member, OPCs feature perpetual succession. A nominee appointed during incorporation typically assumes control in the absence of the sole member.

By combining limited liability, separate legal entity status, and simplified operations, OPCs emerge as an appealing choice for small businesses and startups led by single entrepreneurs.

One Person Company: Registration in India

Due to their similarities with private limited companies, OPCs also employ SPICe+ for their company registration process.

SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is a comprehensive online form introduced by the Ministry of Corporate Affairs (MCA) in India to streamline and simplify the company registration process.

1. Step 1: Apply for DSC

  • Obtain a Digital Signature Certificate (DSC) from any Certifying Agencies in India.

2. Step 2: Submit Part A of SPICe+ Form (If filled separately)

  • Apply for name approval using Part A of the SPICe+ form, allowing for submission of up to two proposed names and one re-submission.

3. Step 3: Draft the MoA & AoA

  • Draft the Memorandum of Association (MoA) and Articles of Association (AoA) detailing the company's objectives and rules.

4. Step 4: Submit Part B of SPICe+ Form

  • Submit Part B of the SPICe+ form along with necessary documents, including DSC, MoA, AoA, and declarations. Pay the prescribed fee for registration.

5. Step 5: Appoint a Nominee

  • Appoint a nominee director as required by OPC regulations.

6. Step 6: File for the Commencement of Business Certificate

  • Within 180 days of incorporation, file for the Commencement of Business Certificate (Form INC-20A) with the Registrar of Companies.

Upon successful approval of the SPICe+ Form, you’ll receive an email notification from the MCA containing the Certificate of Incorporation (COI) and PAN and TAN details of the Company.

The certificate of Incorporation (COI) includes crucial details such as the Company Name, Registration Number (CIN), Date of Incorporation, Registered Office Address, Company Structure, and more.

{{opc-cta}}

For added clarity, check out our curated collection of sample templates, where you can download and customize most of these above-mentioned templates, as required.

Company Registration with Razorpay Rize

Razorpay Rize provides a wide array of services to facilitate an end-to-end streamlined company registration process, all at the lowest fees and without any hidden charges. Explore the different legal structures below to find the one that’s best for your business.

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Our package includes:

  • Company Name Registration
  • 2 Digital Signature Certificates (DSCs)
  • 2 Directors’ Identification Numbers (DINs)
  • Certificate of Incorporation(COI)
  • MoA & AoA [Applicable for Private Limited Companies and OPCs]
  • LLP Agreement [Applicable for LLPs]
  • Company PAN & TAN

*Prices and documents can differ based on the company type.

Find Out Which Company Type to Register

If you operate a small business with limited resources, opting for LLP or OPC registration might be more favourable due to lighter compliance requirements. However, for larger businesses with substantial capital needs, registering as a Private Limited Company provides greater flexibility in raising funds. So, before proceeding with the registration of either a Private Limited Company, LLP, or OPC, it is essential to carefully evaluate the following factors.

  • Business Nature and Size
  • Fundraising Requirements
  • Tax Implications
  • Personal Liability Protection

Ultimately, the choice between a Private Limited Company, LLP, or OPC structure depends on the unique characteristics of your business, including its nature, size, fundraising requirements, tax implications, and personal liability protection.

Still confused about which company type to register with? We’ve got you covered! Introducing our latest tool - "Know Your Company Type."

For the first time in India, answer a quick set of questions about your startup, and this tool will utilize your responses to identify the perfect company registration type for you. Find your ideal fit with just one click!

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In summary, choosing between Private Limited Companies, OPCs, and LLPs depends on your business goals and preferences. Each structure offers unique benefits, whether it's scalability with Private Limited Companies, convenience with OPCs, or simplicity with LLPs. If you have any unanswered questions or want to get started with the company registration process, feel free to get in touch with us!

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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

Nipun Jain

Nipun Jain is a seasoned startup leader with 13+ years of experience across zero-to-one journeys, leading enterprise sales, partnerships, and strategy at high-growth startups. He currently heads Razorpay Rize, where he's building India's most loved startup enablement program and launched Rize Incorporation to simplify company registration for founders.

Previously, he founded Natty Niños and scaled it before exiting in 2021, then led enterprise growth at Pickrr Technologies, contributing to its $200M acquisition by Shiprocket. A builder at heart, Nipun loves numbers, stories and simplifying complex processes.

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 Advantages of a Private Limited Company: Why Choose a Pvt Ltd?

Advantages of a Private Limited Company: Why Choose a Pvt Ltd?

Choosing the right structure is one of the most important decisions when starting a business. And for many, a private limited company is an ideal choice.

A private limited company is a type of business structure commonly chosen by entrepreneurs in India for its unique benefits. It’s a separate legal entity, meaning the company is distinct from its owners, with its own assets and liabilities. 

It offers limited liability protection, meaning personal assets are safeguarded from business debts. Unlike sole proprietorships or partnerships, the structure of a private limited company provides a clear separation between the business and its owners, creating a stable foundation for growth. 

This structure provides greater protection for founders and enhances the company’s credibility with investors, banks and clients, making it easier to secure funding and build partnerships. With the ability to issue shares, private limited companies also have the advantage of raising capital more effectively than other business types. 

Table of Contents

What is a Private Limited Company?

A private limited company is a business structure that is privately held by a small group of shareholders. In this type of company, ownership is divided into shares, but these shares cannot be publicly traded on the stock market. 

Private limited companies combine the benefits of limited liability, where owners' personal assets are protected and can raise capital through private investors.

This structure is popular among entrepreneurs and small—to medium-sized businesses because it provides a formal framework with legal protection for the owners, transparent governance and financial transparency. In India, private limited companies are governed by the Companies Act of 2013, which sets out the rules for formation, operation and compliance.

Advantages of a Private Limited Company

The advantages of being a private limited company are manifold, which makes them an attractive option for business owners. Here are some key benefits of a private limited company:

1. Limited Liability

One of the most prominent advantages of a private limited company is limited liability. This means that the shareholders are only responsible for the company’s debts up to the value of their shares. 

For example, if a shareholder owns 100 shares worth ₹10 each, their maximum liability in case of company debts would be ₹1,000, regardless of the company’s financial situation. This protects personal assets such as homes and savings from being used to pay company debts, offering peace of mind to the owners.

Limited liability ensures that shareholders are insulated from risks beyond their initial investment in the company, making it an ideal structure for reducing personal financial exposure.

2. Separate Legal Entity

Another benefit of a private limited company is that it is recognised as a separate legal entity from its owners. This means that the company can enter into contracts, own property and incur debts in its own name rather than in the name of its shareholders. 

The limited liability of members is also a key feature of this concept, ensuring that individual shareholders are not personally responsible for the company’s liabilities beyond their shareholding. 

As a result, the company can conduct business activities independently, protecting the personal assets of its owners.

3. Uninterrupted Existence

A significant advantage of a private limited company is its concept of ‘perpetual succession.’ This means that the company continues to exist despite changes in its membership or the status of its members. 

For instance, if a shareholder leaves or passes away, the company is not dissolved, and its operations remain unaffected. The company’s existence is independent of any individual member, ensuring long-term stability and continuity. 

This uninterrupted existence allows the company to plan and operate for the future without the disruptions that could occur in other business structures, such as partnerships.

4. Easy Transferability of Shares

One of the key benefits of a private limited company is the ease with which shares can be transferred. 

Unlike a sole proprietorship or partnership, which requires complex agreements or dissolutions for ownership changes, shares in a private limited company can be transferred relatively easily, subject to approval by the other shareholders. This is a significant benefit of a Pvt Ltd company over a proprietorship

This provides flexibility in ownership and is especially beneficial in attracting new investors or facilitating succession planning.

5. Owning Property

As a separate legal entity, a private limited company can own property in its own name. This is distinct from property ownership in a sole proprietorship, where assets are owned personally by the business owner. 

In a private limited company, shareholders do not have personal claims to the company’s assets. This allows the company to acquire, hold and manage property independently, which can be used for business operations, expansion or as an investment.

6. Capacity to Sue and Be Sued

As a separate legal entity or a juristic person, a private limited company has the legal capacity to sue and be sued in its own name. This essential feature allows the company to take legal action or defend itself in court without involving its individual shareholders.

It helps establish the company’s ability to operate as a distinct business entity responsible for its own legal matters.

7. Borrowing Capacity

Private limited companies have significant advantages when it comes to financing. They can raise capital through the issuance of debentures, secure public deposits, and benefit from preferential treatment by banks and financial institutions. 

These advantages make it easier for private limited companies to access funding compared to sole proprietorships or partnerships, which may struggle to raise significant capital. This makes the company more financially stable and better positioned for growth.

8. Tax Advantage

The private limited company tax benefits are significant. Companies enjoy lower Corporation Tax rates compared to sole traders and partnerships. Additionally, private limited companies have the option to reinvest profits back into the business, benefiting from various tax incentives. 

The company can also claim tax deductions for legitimate business expenses, such as staff parties, pension contributions, and other operational costs, providing more tax flexibility than other business structures. These benefits can also streamline the process of self-assessment tax returns, as allowable expenses can lower the overall tax burden, helping companies maximise their profitability.

9. Credibility and Professionalism

A private limited company enhances the credibility and professionalism of a business. Being a registered company with clear governance structures helps build trust with clients, suppliers and investors. 

The formalised nature of the business structure makes it appear more reliable and stable, which can attract larger clients and partners. In contrast, sole proprietorships and partnerships may struggle to command the same level of trust and confidence from stakeholders.

10. Easier Access to Capital

Private limited companies have a distinct advantage when it comes to raising capital. By issuing shares, they can attract investors who are willing to provide funding in exchange for a stake in the company. 

Additionally, private limited companies are eligible for tax incentives like the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), which make it easier to attract investors and secure growth funding. 

Private limited companies are also eligible for recognition under the Department for Promotion of Industry and Internal Trade (DPIIT) and the Startup India initiative, which provides significant benefits to startups in India. DPIIT recognition offers access to various government schemes, funding opportunities and more straightforward compliance requirements. 

Additionally, being part of the Startup India program enables private limited companies to avail of tax exemptions, reduce compliance burdens and raise capital more easily from angel investors and venture capitalists.

11. Confidentiality and Privacy

One key benefit of a private limited company is the level of confidentiality it offers. While the company must disclose certain financial and regulatory information, shareholders' personal details remain private. 

12. Brand Protection

Brand protection is a significant advantage of operating as a private limited company. Since the company is a separate legal entity, its name is registered with the government, ensuring exclusive rights to its use. This protects the company’s brand identity from being copied or misused by competitors. 

Furthermore, registering the company name prevents others from using similar names that could confuse consumers, providing a strong legal foundation for brand recognition. As a private limited company, you can also trademark logos, slogans and other intellectual property, giving you additional legal protection.

This brand security not only boosts credibility but also helps in building long-term customer loyalty and trust.

Try our free search tool to find and verify company name availability instantly. Our user-friendly tool also allows you to search trademarks, domain names and social media handles linked to your business name with a single click, using accurate data sourced from the Trademark and MCA databases.

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13. Flexibility in Ownership

A private limited company offers significant ownership flexibility. Ownership can easily be transferred through the sale of shares, allowing the company to accommodate new investors or adjust ownership as needed. This is advantageous compared to other business structures like partnerships, where ownership changes can be more complicated and disruptive.

Conclusion

In conclusion, there are multiple benefits of Pvt Ltd company structure, making it an appealing business structure for entrepreneurs and investors. From limited liability and tax benefits to greater access to capital and enhanced credibility, the private limited company provides a solid foundation for business growth and stability.

With its flexibility, legal protections and ability to attract investment, it remains a top choice for those looking to build a successful and sustainable business.

Frequently Asked Questions:

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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

Who is the owner of a private limited company?

The owners of a private limited company are its shareholders. The company can have one or more shareholders, and each shareholder owns a certain percentage of shares in the company. 

Shareholders have the right to vote on important company decisions, such as the appointment of directors and approval of financial statements, based on the number of shares they hold. 

However, the company itself is a separate legal entity, meaning the ownership is distinct from the personal assets of its shareholders.

What are the features of a private limited company?

A private limited company has several key features:

  • Limited Liability: Shareholders are only responsible for the company’s debts up to the value of their shares.
  • Separate Legal Entity: The company exists independently of its shareholders, meaning it can own property, enter into contracts and incur liabilities in its own name.
  • Perpetual Succession: The company continues to exist even if the shareholders or directors change.
  • Transferability of Shares: Shares can be transferred, but the transfer usually requires approval from other shareholders.
  • Number of Shareholders: A private limited company can have between 2 and 200 shareholders.
  • Restriction on Public Share Trading: Shares cannot be sold or traded on the stock exchange.

Are there any disadvantages of private limited companies?

There are both private limited company advantages and disadvantages. Here are some disadvantages of private limited companies to consider:

  • Compliance and Regulation: Private limited companies must comply with various regulations, including annual filing with the Registrar of Companies (RoC), which can be time-consuming and costly.
  • Limited Capital Raising: While private limited companies can raise capital by issuing shares, the process is more complex than that of public companies.
  • Restrictions on Share Transfers: Unlike public companies, the transfer of shares in a private limited company may require approval from other shareholders.
  • Higher Costs: Setting up and maintaining a private limited company involves higher costs due to registration, auditing and compliance fees.

What is the difference between Limited and Private Limited?

The primary difference between Limited and Private Limited companies lies in the public availability of shares:

  • Limited: A limited company can be a public limited company, where shares are freely traded on the stock exchange. It is not restricted to the number of shareholders, and its financial information is available to the public.
  • Private Limited: A private limited company has restrictions on share transfers, and its shares are not publicly traded. It can have a maximum of 200 shareholders, and its financials are not publicly disclosed.

In short, a Private Limited company is a private entity with a restricted number of shareholders and limited share transferability, while Limited companies are public entities with freely transferable shares.

Which is better, Private Limited or LLP?

Whether a Private Limited Company or an LLP (Limited Liability Partnership) is better depends on the specific needs and goals of the business:

  • Private Limited Company (PVT Ltd): This type of company is ideal for businesses looking to raise capital through investments or venture capital. It offers limited liability, a separate legal entity, and easier transferability of ownership through shares. 

However, it comes with more regulatory compliance and governance requirements.

  • Limited Liability Partnership (LLP): LLPs offer flexibility in management, with fewer formalities and less regulatory burden. Partners enjoy limited liability, protecting their personal assets, but an LLP cannot raise capital as easily as a private limited company. 

It is better suited for small businesses and professional services.

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