ADVANTAGES OF FORMING A PRIVATE LIMITED COMPANY

A Private Limited Company (Pvt ltd Company) is the most common vehicle to carry on business
as an entity intending to make a profit and enjoy the benefits of an incorporated entity,
particularly limited liability. It is a voluntary association of not less than two and not more than
200 members, whose liability is limited. Their shares cannot be traded on public exchanges and
are not issued through an initial public offering. The shareholders hold all the shares of the
company privately.
Companies Act, 2013 has granted a number of privileges and exemptions to private limited
companies in order to facilitate doing business in India easily and effectively without much
compliance.

ADVANTAGES OF FORMING A PRIVATE LIMITED COMPANY:

1. Ease to Form: In earlier time incorporation of Private Limited Company involved huge
   time and money and was not a cake walk for a businessman. However, in order to promote
   Digital India concept of Modi Government, incorporation norms have been made
   relaxed. A private limited company can be formed by two people after complying the
   formalities as laid down under Companies Act, 2013 by filing Spice Forms.
2. Limited Liability: Unlike Proprietorship and Partnership where the liability of owner is
   unlimited, a private limited company limits the liability of the shareholders to the amount
   that is unpaid on the shares issued to them. The liability of the members of a company is
   limited only to the extent of the value of shares taken up by them.
3. Minimum Capital Requirement: Earlier there was a requirement of minimum Rs. 1 lakh
   paid up share capital for incorporation of Private Limited Company, now such limit has
   been waived off by the Ministry of Corporate Affairs. Hence, there is no minimum capital
   requirement for formation of Private Limited Company.
4. Separate Legal Entity: A Company is an artificial person which is controlled and run by
   the Individual Directors. However, in the eye of law it is separate legal entity different
   from the person acting on behalf of the Company. This is one of the major benefits which
   come up with the registration of private limited company as the members are not
   personally liable for the act of the Company.
5. Perpetual Succession: Being a separate legal entity in the eyes of law, the private
   limited company is known by its name. Thus the cessation/ death of director/ or
   members does not affect the life of the Private Limited Company. the members may
   come and members may go but the company goes forever.
6. Foreign Direct Investment: Every business requires time to time fund for its survival and
   growth. One of the major alternate options available to private limited company is that
   they may raise the fund through Foreign Direct Investment by the Foreign Entity subject
   to the terms and conditions laid down in the RBI guidelines and FEMA Provisions.
7. Scope of expansion: Scope of expansion is higher because the control remains in the
   hands of people associated privately. Hence, the decision can be taken and executed
   conveniently and faster.
8. Power to sue and be sued: Being a separate legal entity, a private limited company
   can file a suit against the third party in its own name and the third party may also file suit
   against it.
9. Transfer of shares: The shares of a private limited company are free transferable subject
   to a condition as may be imposed by the board of directors. Hence it becomes easy to
   control the transfer/ dilution of interest and avoid outside interruption in holding of
   shares.

Conclusion:

Incorporation of private limited company may give wings and helps you in accomplishment of
your dreams. However, If you are still not clear about how incorporation of private limited
company may benefit your business, then feel free to contact us for detailed discussion at
8010233173 or drop us an email @ complianceship@gmail.com /
contact@complianceship.com