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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
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 @ email@example.com / firstname.lastname@example.org