Starting a business is one of the most interesting and rewarding experience of anyone’s life. One of the critical decisions made by the entrepreneur while starting this journey is the selection of his business entity. The choice of the business entity has long term implications for throughout the business’ life-cycle. Hence, it is important to discuss your business plan with a professional, and choose an entity that will support the vision of the business. In this article, we will thoroughly amd precisely explain why you should opt for a Private Limited Company.
No Minimum Capital
No minimum capital is required to form a Private Limited Company. A Private Limited Company can be registered with a mere sum of Rs. 10,000 as total Authorized Share capital.
Separate Legal Entity
A Private Limited Company is a separate legal identity in the court of the law, meaning assets and liabilities of the business are not the same as the assets and liabilities of the Directors. Both are counted as different. A Private Limited Company separates Management and Ownership and thus, managers are responsible for the company’s success and are also answerable for the company’s loss.
The liability of each member or shareholder is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
A Private Limited Company in India is the only form of business except Public Limited Companies that can raise funds from the Venture Capitalists or Angel investors. Shareholders allowed are up to two hundred and another two hundred members are allowed, this many numbers and the reputation of the private limited company makes it easier to raise capital funds in comparison to other forms of companies. Therefore, we can say the scope of expansion is greater when a private limited company is incorporated. Taking debts from banks and other financial ventures are quite easy too.
Free & Easy transfer of shares
Shares of a company limited by shares are transferable by a shareholder at any other person. The transfer is easy as compared to the transfer of an interest in a business run as a proprietary concern or a partnership. Filing and signing a share transfer form and handing over the buyer of the shares along with share certificate can easily transfer shares.
A Private Restricted Organization has ‘Unending Progression’, that is proceeded or continuous presence until it is legitimately broken up. An organization, being a different lawful individual, is unaffected by the passing or other flight of any part yet keeps on being in presence independent of the progressions in enrollment. ‘Ceaseless Progression’ is quite possibly the main attributes of an organization. Private Limited companies are not affected by the status of their own when it comes to their existence.
In Private Restricted Organization, 100% Unfamiliar Direct Speculation is permitted that implies any unfamiliar substance or unfamiliar individual can straightforwardly put resources into a Private Restricted Organization.
They pay tax on taxable profits and are exempted from higher personal income tax rates.
A private limited company must make a lot of information about its structure, operations and financials available to the Registrar of Companies. This information ends up in the public domain. Therefore, vendors, lenders, employees can all find information relating to the company, such as authorized capital, names of directors, registered office, etc. This information makes a business more credible than entities that don’t have to furnish this information (such as partnerships and proprietorships).
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.
Capacity to sue
As a juristic legal person, a Company can sue in its name and be sued by others.
A person can act as a shareholder, a director and an employee at the same time when the private limited company is taken into consideration. They are considered reliable too.
Private limited companies can be sold or transferred, either partially or in full, to another individual or entity without any disruption to the current business.
If a business is into developing products on a global scale and aiming to expand its operations across the world, then it is important to get investments and form collaborations with foreign establishments. One advantage of private limited companies here is that they allow for FDI up to 100% through the automatic route, which means there is no requirement of any government approval for foreign companies to make an investment in India. This is against Partnerships, LLPs which need acceptance from the government.
Scope of multiple opportunities
Successful entrepreneurs are always on the lookout for opportunities wherever possible and in different industries or sectors. Often, they are eager to grab the chances and test waters. Private limited companies have the scope of utilizing the chances as the business grows over time whereas sole proprietorships and partnerships cannot take up as they are tied to the promoter.
As private limited companies are regulated by the Companies Act 2013 and need to follow stringent procedures, disclose norms, comply with various legal requirements, they are more organized creating value for owners.
Thus, a private limited company offers much more advantages than other entities. It is always best to get the company registration done by legal experts. 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.
Expert’s take on forming Private Limited Company in India
From the above discussion, it’s quite explicit why a private limited company in India is so popular among beginners and other entrepreneurs. A Pvt Ltd Company is pretty easy to form and can be started even with a paid-up capital as miminum as zero. Furthermore, to encourage the youth for start-up, the Honourable PM of India, Shri Narendra Modi has started a Start-up India campaign. Under this campaign, start-ups are provided with several benefits and tax exemptions for three consecutive years. Rest of the benefits, we have already described above.
Therefore, if you are planning to register your business as a private limited company in India, then contact FileFunda Experts. Our dedicated team will help you register your company in the least possible time. Moreover, if you have any query related to Pvt Ltd Company registration or annual compliances, you can again contact us.
Priya Choudhury is an Advocate. She is associated with FileFunda.com as an operational executive and business adviser. Her prowess is in corporate management, legal drafting and IPR. She holds degree of BA, LL.B