A private limited company is a privately held business entity. There are many advantages of private limited company where business owners hold all the shares of the company privately. The Shareholders may operate the business themselves, or either hire directors in order to manage the company on their behalf. Company Registration result in the protection of personal assets, access to more resources, financial assistance and also helps in greater tax cuts. Company Incorporation requires a minimum of two members and can be easily extended up to two hundred. A minimum requirement of directors is two and maximum limit is fifteen. Private Limited Company will have benefits as a partnership firm. Registration of a Private Limited Company is done according to The Companies Act,2013 read with rules. It is always a better option than LLP or One Person Company.
Read More about Differences between Private Limited Company and LLP.
Advantages of private limited company
Here are a few advantages of Private Limited Company Registration
In Private Limited Company, the company will have a separate legal entity and it will have limited liability. Furthermore, if anything happens to a company, then members will not be held personally responsible, but they are only liable for the unpaid shares.
One of the advantages of Private Limited Company Registration is it enjoys tax benefits as compared to the sole proprietor. These companies pay the corporation tax on their taxable profits and thus they tend to be exempt from the higher personal income tax rates. Going for company registration instead of continuing as a sole trader or sole proprietor opens the door to more tax-deductible costs and also helps in allowances that are redeemable against the profits.
Finance and Resources
Company Registration is necessary for large-scale production, as it helps to protect the interests of the lenders. With an adequate funding, the company can produce goods which are at a lower cost, which helps in to increase the profits and customer satisfaction. Hence, the business becomes secure.
Private limited company , however, enjoy permanent succession because the company has its own legal entity. The Shareholders and the employees act “as agents of the company,” and therefore, their leaving does not affect the company. however, In the event of death or resignation, the company’s Articles of Association allocates the shares to the remaining members. Discontinuation of the company only occurs through the process of liquidation or through similar means. Guaranteed succession not only benefits the members, but it also secures jobs and resources for the community.
Stock Market Pressure
Private limited companies are not pressurized by the stock market and it doesn’t have to worry about shareholder expectations and interference as long as they work within the law. Shareholders in public companies are focused on current earnings and they exert pressure on the company to increase earnings.
A public company is required minimum share capital of Rs.5, 00,000. For a private company, the earlier minimum number of share capital was Rs.1, 00,000. Therefore there is no pressure of fund requirements.
It is obviously not appropriate, for competitors to know about your business secrets. Confidential information such as executive compensation, legal settlements, and other sensitive information cannot be kept confidential in public companies. Such information is more secure in a private limited company.
So, therefore, a Private Company Registration is less complicated as compared to a public company. It is comparatively less expensive and less time-consuming.
There are many types of private limited company, but most preferable for the business purpose is Private Limited Company– Limited by Shares. This type of business configuration gives maximum protection for its members and is most widely accepted.
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