Incorporating a private limited company

What incorporation involves

A private limited company is incorporated under the Companies Act, 2013 through the MCA portal. The SPICe+ form combines several steps in one application: name reservation, the Director Identification Number for each new director, the company PAN and TAN, and optional registrations such as GSTIN, EPFO and ESIC. Directors sign electronically with a Digital Signature Certificate, so arranging those certificates is usually the first task.

The structural minimums are simple. A private company needs at least two directors, at least one of whom is resident in India, and at least two shareholders, with a ceiling of 200 members. There is no minimum paid-up capital today, but the authorised capital you declare drives the registration fees and the state stamp duty on the charter documents, so choose the figure with your adviser rather than copying a round number.

Directors, shareholders and the registers you must keep

Incorporation creates duties that are easy to forget in the excitement of launch. The company must hold its first board meeting, appoint a first auditor, keep a registered office that receives official post, and maintain statutory registers of members, directors and share transfers. Board meetings must be held at least four times a year, with no more than 120 days between two consecutive meetings, and every meeting needs minutes.

A company that has issued shares must also file a declaration that it has started business within 180 days of incorporation, otherwise the registrar can begin proceedings to strike it off. Treat that date like a tax deadline: write it into your calendar on the day the certificate arrives.

Your first weeks: bank account, invoicing and the first sale

Subscribers deposit their share money into the company's own bank account, never a personal one. Take a worked example: two founders subscribe to 50,000 equity shares of ₹10 each, a total of ₹5,00,000. That deposit, the bank statement and the allotment records form the first entries of your books and should be filed where your accountant can find them.

The Companies Act also expects the company's name, registered address and CIN to appear on its business letters and bill-heads, so your invoice template should carry them from the first document. In 4invoices you set the company details once, add the GSTIN when it is issued, and every invoice that follows is numbered, stored as a PDF and kept in the archive.

Do not start trading under the company's name before the PAN, bank account and, where required, GSTIN are in place. An invoice issued by a registered entity without a GSTIN cannot carry GST, and fixing that later means reissuing documents and explaining the gap to customers. A short checklist helps: certificate of incorporation received, bank account open, invoicing template carrying the CIN, first customer record created, first agreement signed.

Agreements: founders, hires and vendors

The documents signed in the first month tend to shape the next five years: the shareholders' agreement, founder vesting terms, employment letters, and vendor or client contracts. Stamp duty on instruments is a state subject, so a document signed in Karnataka and one signed in Maharashtra may be stamped differently; ask your lawyer which rules apply before you sign anything.

What a tool can do is keep the process orderly. In 4mycontracts you draft an agreement, send it to the reviewer, record who approved which version and collect the electronic signature. Electronic records and signatures are recognised under the Information Technology Act, 2000, though some document types still need physical stamping, which your adviser will flag.

Annual obligations from the first year

The financial year runs from 1 April to 31 March. After it closes, the company's accounts are audited, adopted at a general meeting and filed with the Registrar of Companies in the prescribed forms, typically AOC-4 for the financial statements and MGT-7 for the annual return. Each director also completes an annual DIN KYC. Your company secretary or chartered accountant files these; the apps here only make sure the underlying invoices and contracts can be produced on request.

A practical habit is a quarterly folder review: confirm that every sales invoice sits in the archive, every signed agreement is stored with its approval trail, and every board meeting has minutes. Founders who do this rarely face the scramble that follows an audit query or an investor's due-diligence list.

On the tax side, a company pays advance tax in instalments during the year, due on 15 June, 15 September, 15 December and 15 March, once its estimated liability crosses the statutory limit. The income tax return of a company is generally due on 31 October after the year closes, with extensions notified by the Income Tax Department from time to time. Late filing and late advance tax both attract interest and fees, so put these dates in a shared calendar for the finance owner.

Common mistakes in the first year

Founders most often mix personal and company money. Paying a company vendor from a personal account, or withdrawing cash without a recorded reason, leaves entries that your accountant must later classify as director loans, salary or expenses, each with different consequences. Decide at the start which expenses the company bears and route them through the company account.

The second mistake is verbal arrangements between founders. Who owns the code, the brand or the client list is a question that stays quiet until the first disagreement; a signed shareholders' agreement with vesting and exit terms is far cheaper than the dispute it prevents. The third is missing minutes: lenders and investors ask for board minutes and resolutions during due diligence, and recreating them years later invites questions.

Finally, founders underestimate the time to answer a registrar query. Keep the email address and mobile number registered with the MCA monitored, because notices go there, and tell your company secretary which person owns the response.

A private limited company needs at least two directors, and at least one of them must be resident in India, meaning present in the country for at least 182 days in the previous financial year. More directors can be appointed as the company grows. Each director needs a Director Identification Number and a Digital Signature Certificate before signing the incorporation documents.

No minimum paid-up capital is required today. You still declare an authorised capital, and that figure affects the registration fee and the stamp duty payable on the memorandum and articles of association. Because stamp duty differs from state to state, ask your chartered accountant or company secretary to calculate the total before you file, so the budget is realistic.

Timelines depend on name approval, how quickly the digital signatures are ready, how complete the documents are and whether the registrar raises queries. Many straightforward applications are processed within days, but you should not promise a date to investors, landlords or banks until the certificate of incorporation is actually issued and you hold the company PAN.

No. Incorporation and annual filings are made on the MCA portal by you or your adviser. 4b2b provides the invoicing, contract and CRM apps you use after incorporation, and it has no connection to the Registrar of Companies, the GST Network or any other government system. Your company secretary or accountant files with the Registrar and the Income Tax Department on your behalf.

Keep the certificate of incorporation, the memorandum and articles, the bank account opening documents, board minutes, share allotment records, signed founder and employee agreements, and every sales invoice. An auditor or investor will ask for them, and having them in one searchable place saves days of reconstruction later. A shared folder organised by financial year makes the annual filing and any investor review far quicker.

From incorporation to first invoice

Issue professional invoices from the week you incorporate.