Pvt Ltd Company doubts

I want to start a Pvt Ltd Company.
I have 3 directors- Me (40%) ; My Brother (30%) ; My Mother (30%)

I have 30 Lakhs.
Brother has 1 Cr.
Total 1.3 Cr is own fund & not borrowed

How to infuse money into the company?

According to my understanding, we can infuse funds by

  • Company taking unsecured loans from directors.
  • Issuing equity share

My questions are:

  1. If the company takes loans from the directors, is the interest paid to the director considered an expense?

  2. I have 40% of the company & my brother has 30%. Can he infuse 1.3 Cr & I infuse 30L keeping the shareholding the same?

  3. If the company make 1Cr in PAT, does that mean I own 40L & others 30L , 30L ?(Considering I have 40% of the company & my brother has 30%. He infused 1.3 Cr & I infused 30L)

  4. According to my understanding company does not have any value if it weren’t for the director’s money, right?

@Shrutika_Shah @CA_Niyati_Mistry @Muskan_Balar

@AkashJhaveri Can you please help?

Hello @dtyxg

Minimum paid up capital for incorporation of a company is 1 lakh. It means you can start a company with a capital of 1 lakh. It can be deposited to the bank account of a company by the owners in the proportion of the ownership.

Answers to your questions are as below:

  1. Yes, interest paid on loans can be claimed as expense. However, it cannot be more than market rate. Also, it will be considered as related party transaction and disclosed separately in notes to accounts.

  2. Infusion can be of any amount. You have to decide the capital and anything above that will be deemed to be unsecured loan. Ex. If you start with a capital of 10 lakh then your share will be 3 lakh (30%) and balance will be treated as unsecured loan.

  3. Profit sharing has to be in the ratio of ownership. You cannot distribute otherwise. However, you can repay the loan from director.

  4. Nothing like that. Generally a company is incorporated with the intention to establish a new legal entity in the eyes of law. Director and company both will be separate and laws will apply accordingly with limited liability.

Hope this clears your doubts. Thank you.