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The owners of a private limited company are known as shareholders . Shareholders have to be invited by the business before they can purchase a share of the business. A share is a portion or percentage of a company. Private limited companies pay corporation tax.

In India companies are formed and registered under the Companies Act 1956. Incorporation of a company requires registration of formal documents with the Registrar of Companies. Memorandum of Association is the important document which contains the fundamental conditions and purposes for which a company is formed.

Minimum of 3 directors is required to form a public limited company. A minimum authorised share capital of Rs. 1 lakh is required. Digital signature certificate (DSC) of one of the directors is needed while submitting self-attested copies of identity and address proof.

Private companies may issue stock and have shareholders, but their shares do not trade on public exchanges and are not issued through an initial public offering (IPO). As a result, private firms do not need to meet the Securities and Exchange Commission's (SEC) strict filing requirements for public companies.

The prerequisites for the incorporation of a private limited company are that: The number of members must be between 2-200. There must be at least two directors and two shareholders. Each director must have a Directors Identification Number (DIN)

The Companies Act, 1956 broadly classifies the companies into private and public companies and provides for regulatory environment on the basis of such classification. However, with the growth of the economy and increase in the complexity of business operation, the forms of corporate organizations keep on changing.

The Companies Act 2013 ('Act') regulates the company incorporation procedure and the provision of the company registration certificate. A company established in India cannot run its business without the registration certificate granted by the Registrar of Companies (ROC).