11 Advantages of Private Limited Company | YOU MUST KNOW

 

Private limited company registration online is the most frequent business structure for an entity looking to generate a profit while also enjoying the benefits of being incorporated, particularly limited liability. The main advantages of private limited company are a separate legal entity.

 

Pvt ltd Company have the following benefits in addition to limited liability and little legislative compliance:

 

No Minimum Capital Requirement

A Private Limited Company can be formed with no minimum capital. The total Authorized Share Capital of a Private Limited Company might be as low as Rs. 10,000.

 

Legal Entity 

An entity is a creature that has a separate existence and has true existence. Under the Act, a firm is a legal entity and a juristic person. A person who is not a natural person or a human being is referred to as a juristic person. 

As a result, a company has a broad legal competence and can possess property as well as incur debts. 

A company's members (Shareholders/Directors) are not liable to the company's creditors for such debts. As a result, a Pvt ltd corporation is a legal entity distinct from its members.

 

Existence without interruption

A firm has 'perpetual succession,' which means it will continue to exist until it is lawfully dissolved. 

A corporation is a separate legal entity, it is unaffected by the death or other departure of any of its members. Also, it continues to exist regardless of membership changes. 

One of a company's most significant traits is perpetual succession.

 

Limitation of Liability

Restricted Liability refers to a person's legal responsibility for a company's debts being limited to a certain level. Unlike sole proprietorships and partnerships, the member's liability for the firm's debts is limited under a limited liability corporation. 

In other words, the members of a corporation are only liable to the extent of the face value of the shares they hold. 

As a result, in a business limited by shares, the members' responsibility on a winding-up is limited to the amount owed on their shares.

 

Transferability of shares is free and simple.

A shareholder can transfer his or her shares in a business limited by shares to anyone else. When compared to the transfer of an interest in a business conducted as a sole proprietorship or partnership, the transfer is simple. It is simple to transfer shares by filling out and signing a share transfer form and giving over the buyer of the shares along with the share certificate.

 

Owning Premises

A firm can acquire, hold, enjoy, and alienate property in its own name because it is a legal entity. So long as the firm is a going concern, no shareholder can claim any of the company's assets. 

The company's property is not owned by the stockholders. The ultimate owner is the corporation itself.

 

Having the ability to sue and be sued

Suing means to take legal action against someone or to file a lawsuit in a court of law. A firm, as an autonomous legal body, can sue and be sued in its own name, just as one individual can launch legal action in his or her own name against another in that person's name.

 

Relationship with two people

A corporation can make a legitimate and effective contract with any of its members under the company form of organisation. It is also feasible for a person to be the CEO of a firm and work for it at the same time. As a result, a person can be a shareholder, creditor, director, and employee all at the same time.

 

Capacity to Borrow

A corporation has more options for borrowing money. It can issue both secured and unsecured debentures, as well as accept public deposits, among other things. Even banks and financial organisations prefer to lend huge sums of money to corporations over partnership firms or sole proprietorships.

 

FDI is permitted

Foreign Direct Investment (FDI) of 100 per cent is permitted in a Private Limited Company, which means that any foreign business or foreign individual can invest directly in a Private Limited Company.

 

Enhances credibility

The company's information is published on a public database. This enhances the company's credibility by making it simple to verify the information.

 

Disadvantagess of a Private Limited Company

• One of the most significant disadvantagess of a Private Limited Company is that its articles limit the transferability of shares.
• In any case, the number of shareholders in a Private Limited Company cannot exceed 50.
• A Private Limited Company also has the disadvantages of not being able to submit public prospectuses.
• Shares cannot be quoted on the stock exchange.

 

What is a private limited company?

A Private Limited Company (PLC) is a privately held corporation for small businesses. The responsibility of members of a Private Limited Company is limited to the number of shares that they own. The shares of a Private Limited Company cannot be exchanged publicly.

The most basic and often used form of business registration in India is the private limited company. It requires a minimum of two persons to register. 

It is the most recommended type of business entity for millions of small and medium-sized firms that are family-owned or professionally managed due to many advantages of private limited company like protection for shareholders, capacity to obtain equity money, and independent legal entity status.

 

Minimum Requirements for a Private Limited Company

• A minimum of two adult directors are required.
• A Private Limited Company must have at least one director who is both an Indian citizen and a resident of India.
• A foreign national can be one of the other directors.
• It is also necessary for a firm to have two shareholders.
• Natural humans or artificial legal entities can be shareholders.

 

Conclusion

Finally, we can state that while a private limited company registration online is the most frequent type of organisation, it does have a number of advantagess, including increased profit potential and stability. It does not imply that it is a perfect business model, as it has its own drawbacks. Though one may argue that the advantages of private limited company outweighs the downsides.

If you want to form a private limited company to benefit from all of its benefits, LegalRaasta can assist you in doing so and making the registration and related legal procedures as simple as possible.