Advantages of a Private Limited Company
No Minimum Capital:
There is no minimum capital requirement to
form a Private Limited Company, and it
can be registered with as little as Rs. 10,000 in total
Authorized Share capital.
Separate Legal Entity:
A Private Limited Company is a separate
legal identity in the eyes of the law, which
means that the assets and liabilities of the business
are distinct from the assets and
liabilities of the Directors. A juristic person is
someone who isn't a natural or human being.
Members of a company are not liable to the company's
creditors for such debts. A Private Limited
Company separates management and ownership, so managers
are accountable for the company's
success as well as its failure.
Tax Efficient:
Because they can claim corporation tax
relief on their profits, private limited
companies are tax efficient. This can result in
significant savings for businesses and increased
profits, as well as capital allowances and R&D tax
credits. Dividends paid by private limited
companies to their shareholders are taxed at a lower
rate.
Uninterrupted existence:
A company, as a separate legal person, is
unaffected by the death or other departure
of any member and continues to exist regardless of
membership changes.
Limited Liability:
The status of being legally responsible only
for a limited amount of a company's
debts. As a result, where a company is limited by
shares, the members' liability on a winding-up
is limited to the amount unpaid on their shares. For
example, if a Private Limited Company takes
a loan and is unable to repay it, the members are only
obligated to pay the amount they own
towards their own shareholding, i.e. the unpaid share
value. This means that if you have no
balance payable on the number of shares you own, you are
not liable to the company for any debt
or credit amount that remains unpaid.
Fund Raising:
In India, the only type of business that can
raise funds from Venture Capitalists or
Angel Investors is a Private Limited Company.
Transferability of shares is free and simple:
A shareholder's shares in a company limited
by shares are transferable to any other
person. When compared to the transfer of an interest in
a business run as a sole proprietorship
or partnership, the transfer is simple. Transferring
shares is as simple as filling out and
signing a share transfer form and handing over the
buyer's shares along with the share
certificate.
Easier to Manage:
Due to the flexibility to set up an
unlimited number of bank accounts, income and
expense items, and other features, many online
accounting software suppliers have integrated
into their systems as private limited companies have
risen in popularity. These include
submitting annual returns and reports to Companies
House, holding shareholder meetings, and
maintaining accurate company records.
Owning Property:
As a legal person, a corporation can
acquire, own, enjoy, and alienate property in
its own name. As long as the company is in business, no
shareholder can make a claim on its
assets.
Suiting and being sued:
Suing means to initiate legal proceedings
against someone or to file a lawsuit in a
court of law. Just as one person can sue in his or her
own name against another in that person's
name, a company, as an independent legal entity, can sue
and be sued in its own name.
Dual Partnership:
A company can enter into a valid and binding
contract with any of its members under
the company form of organization. It is also possible
for a person to be in charge of a company
while also working for it. An individual can thus hold
multiple positions within the
organization at once, including shareholder, director,
employee, and any other position.
Borrowing Capacity:
A company has more options for borrowing
funds. It can issue both secured and
unsecured debentures and accept public deposits, among
other things. Even banks and financial
institutions prefer to lend large sums of money to
corporations rather than partnership firms or
proprietary concerns.
Foreign Direct Investment (FDI):
It is permitted in a Private Limited
Company, which means that any foreign entity or
foreign person can invest directly in a Private Limited
Company.
Builds Credibility:
The company's specifics are available on a
public database, which increases the
company's credibility by making it simple to
authenticate the details.
