Question 1

What is the minimum capital required to incorporate a Private Limited Company in India?

Accepted Answer

Under current MCA rules, there is NO statutory minimum paid-up capital requirement. You can start with as little as ₹1,000 or ₹10,000 authorized capital. Furthermore, government incorporation fees are ₹0 for authorized capital up to ₹15 Lakhs under MCA SPICe+ rules.

Question 2

How many directors and shareholders are legally required?

Accepted Answer

A Private Limited Company requires a minimum of 2 directors and 2 shareholders (the same 2 individuals can serve as both). At least one director must be a resident in India (stayed ≥ 182 days in the previous financial year). For an OPC (One Person Company), only 1 director/member is needed.

Question 3

Can a residential house or rented flat be used as the registered office?

Accepted Answer

Yes, absolutely. The registered office does not need to be a commercial property. A residential address (including your rented flat or parents' house) is 100% legally acceptable with an electricity bill and owner NOC.

Question 4

Is Angel Tax still applicable to startups in India?

Accepted Answer

No. The Finance (No. 2) Act, 2024 (Budget 2024) formally abolished Section 56(2)(viib) of the Income Tax Act (famously known as the 'Angel Tax') for all classes of investors effective from Assessment Year 2025-26. Indian startups can now raise capital at negotiated valuations without tax scrutiny on share premium.

Question 5

Can a salaried person or corporate employee become a director in a Private Limited Company?

Accepted Answer

Statutorily, the Companies Act does NOT prohibit an employee from becoming a director or shareholder. However, you must review your employment contract for dual-employment or moonlighting restrictions. Many founders hold equity as passive shareholders initially or obtain written employer consent.

Question 6

Can Foreign Nationals or Non-Resident Indians (NRIs) be directors or shareholders?

Accepted Answer

Yes. NRIs, PIOs, and foreign nationals can become directors and hold 100% equity in an Indian company under the Automatic FDI Route (subject to sectoral caps). The only mandatory requirement is that at least one co-director must be an Indian resident, and foreign identification documents must be apostilled or notarized.

Question 7

What is Form INC-20A (Commencement of Business) and why is it critical within 180 days?

Accepted Answer

Within 180 days of incorporation, all subscribers must deposit their subscribed share capital into the company's corporate bank account, and the company must file Form INC-20A with MCA along with the bank statement proof. Missing this filing incurs a ₹50,000 penalty on the company, ₹1,000/day on directors, and Registrar power to strike off the company.

Question 8

What is the difference in tax rates between a Private Limited Company and an LLP?

Accepted Answer

Domestic operating companies incorporating under Section 115BAA enjoy a flat corporate tax rate of 22% plus surcharge/cess (effective ~25.17%). In contrast, an LLP is taxed at a flat 30% plus surcharge/cess (effective ~31.2%). However, LLPs do not attract Dividend Distribution Tax on profit withdrawals by partners, making them tax-efficient for service consultancies.

Question 9

Is GST registration mandatory immediately after company incorporation?

Accepted Answer

No. GST registration is NOT mandatory upon incorporation unless your business expects to cross the statutory turnover threshold (₹40 Lakhs for goods, ₹20 Lakhs for services), or if you engage in inter-state sales, e-commerce, software exports under LUT, or reverse-charge transactions.

Question 10

What is the difference between Authorized Capital and Paid-Up Capital?

Accepted Answer

Authorized Capital is the maximum amount of equity capital the company is legally allowed to issue to shareholders as specified in its Memorandum of Association (MOA). Paid-Up Capital is the actual money deposited by shareholders into the company's bank account against issued shares. You can increase Authorized Capital later by filing MCA Form SH-7.

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