A private limited company (pvt ltd company) is the most common to carry on business for an entity intending to make a profit and enjoy the benefits of an incorporated entity, particularly limited liability.Private Limited Company can be formed with a minimum of two members; this number can be extended up to two hundred members. A minimum of two directors is needed which can go up to fifteen. This form of business shares many similar traits with partnership firm. A total of two hundred shareholders is acceptable in a private limited company. A properly formulated registration procedure has been mentioned in companies Act. You may ask that why you should opt for Private Limited Company when there is LLP and One Person Company. Besides, limited liability and minimal statutory compliances,there are some advantages of Private Limited Company as follows:
The Company exists as a separate legal entity as from its members. The liability of the company is different as from its members of a company. Liability for repayment of debts and lawsuits incurred by the Company, lies on it and not the owner. The liability of a company can be divided into 2 major segments
Liability limited by Shares
Liability Limited by Guarantee
Liability limited both by Shares and by Guarantee
An incorporated company has perpetual succession. Perpetual Succession means the company shall continue to exist even if the member dies or ceases, etc. Changes within the management does not bring any affect onto the identity of the company, the Company will remain the same with same privileges, immunities, estates and possessions. The Company shall continue to exist till its wound up in accordance with the provisions of the relevant law.
Easy Transferable Ownership:
The shares and other interest of any member in the Company shall tend to be a movable property and can be transferable in the manner so provided by the Articles of such company. Therefore, it is easier to subscribe or leave the membership of the Company. Also it is easier to transfer the ownership.
A Company as a legal entity is capable of owning its funds and other properties. The Company is the real person in whose hands all the property is vested and such company has the sole right to control, manage and dispose off the property so vested in the hands of the company. The property of Company is not the property of its shareholders.
As everyone wants to minimize his tax burden thus company as per the income tax act 1961 has another main benefit of incorporation towards taxation. Companies are often taxed at a lower rate and are provided with better taxable benefits as compared to other forms of business organization.
Raising money as a small business and a sole proprietorship or partnership can be difficult. But as per Companies act 2013 a company can sell shares to the public or can accept deposits from public and can therefore raise money easier than other business structure types. The modes of financing business carried on by company are numerous. Moreover, since the companies are governed by particular law and have to comply with stringent disclosure norms, therefore they enjoy good credit worthiness with various financial institutions
Selling the Business:
It is easy to sell business for a company than any other business form. As business Corporation value will be based on the business, not the owner, therefore making it easy to sell the Company.
Capacity to sue As a juristic legal person, a Company can sue in its name and be sued by others.
Companies are governed by The Companies Act, 2013 and have to follow various other regulatory procedures during the course of its governance, moreover they have to comply with the stringent disclosure norms so imposed by the authority, which let to better governed organizations and creation of value for owners.
At the end, we can conclude by saying that not the only private limited company is a common form of business but it has many advantages including more scope of profit and stability. This does not mean that it is an ideal form of business since it has its own disadvantages too. Though one can say that advantages of private limited company overrule the disadvantages.
If you wish to get a private limited company registration seeing all its advantages, we, at HerambIndia can help you register it and make registration and related legal procedures easy for you.