Karnataka is a state in the southwestern part of India. It used to be called ‘The state of Mysore’. The economy of Karnataka is the third largest in India. It is known for having many big industries and is a leader in biotechnology. Karnataka is also where most of the silk industry in India is based.

If you want to start a business in India, Karnataka is a place you should seriously consider. Once you have a business idea and decide to start, you need to follow the Company Formation Procedure in India.

Small, medium, and large businesses in India consider a Pvt Ltd Company as one of the most popular legal structures. Anyone looking to build a scalable business can choose it. Registering a Pvt Ltd Company requires a minimum of two members and allows for a maximum of two hundred members.

A Pvt Ltd Company, which is a type of small business entity held privately, has limited liability of members to their shares and a maximum membership of 200. Additionally, it cannot invite the general public to subscribe to its securities. Pvt Ltd Company registration in India is governed by the Ministry of Corporate Affairs (MCA), Companies Act 2013, and Companies Incorporation Rules, 2014.

Shareholders’ liability is limited only to the unpaid amount of shares, thus creditors can only sell the company’s assets in case of default, without touching the personal assets of directors and shareholders.

Startups and growing businesses often choose a Private Limited Company because it allows them to raise funds from outside India, limits shareholders’ liabilities, and offers employee stock options to attract top talent.

Furthermore, these entities are required to hold board meetings and file annual returns with the Ministry of Corporate Affairs (MCA), which adds to their credibility compared to a Sole Proprietorship or General Partnership.

• Membership

A Private Limited Company can be formed with a minimum of 2 members or shareholders. An individual person above 18 years of age or a corporate body can be a member or shareholder in it. Moreover, the maximum number of members/shareholders in a Private Limited Company can go up to 200.

• Directorship

A Pvt Ltd Company needs to have a minimum of 2 directors who shall manage the conduct and affairs of the company. The directors may be existing shareholders of the company or can be a person other than a shareholder. There may be a maximum of 15 directors in any company. Furthermore, every Indian Company has to ensure that they have 1 director who is a permanent resident of India.

• Restriction on Transfer of Shares

The members/shareholders of private limited companies cannot transfer their shares publicly. Therefore, there can be a restriction on the transferability of shares in these companies.

• Foreign Direct Investment (FDI)

Foreign citizens, foreign corporate entities, NRIs, or OCIs can invest in a Private Limited Company and become its shareholder. This is why foreign promoters prefer Private Limited Companies.

• Prohibition on Inviting Investments from Public

A Pvt Ltd Company cannot invite the general public to purchase or subscribe to its shares or any other kind of securities. Also, it cannot accept deposits from the public other than its members, directors, or relatives of directors.