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.
