The private limited Company is the most preferred form of business and very popular among the startups; It is necessary to understand the correct and legal meaning of the term Private Limited Company and what are the advantages of forming a company as private limited. As you must be aware that at least two shareholders form a private limited company and the maximum limit is two hundred shareholders. In this post, we shall be discussing the advantages of a Private Limited Company.
Setupfilling.com offers its professional services for opening a private limited company. To understand the list of documents and stepwise process of company registration, please visit our dedicated webpage on Company Registration. You may reach us for any assistance in setting up your Company. We have listed out the advantages of a private limited company in the below section of the post. Please leave a message in the comments sections for us to improvise or to ask any question on why people register a private limited company.
Advantages of Private Limited Company
- Limited Liability of Shareholders - One of the most crucial features of the Company is the Limited Liability to its shareholders. By limited liability, we imply that the owners or shareholders of the Company are not personally liable to pay debts of the business. They are only responsible for the unpaid shares of the capital of the Company. To reap the Limited Liability Benefit, the owner needs to comply with all laws.
- Perpetual Succession - Perpetual Existence implies that the Company is unaffected by the death of the owner or the transfer of its shares to a new shareholder. The best part of perpetual existence is that a company will continue to exist, no matter how many directors, officers, and shareholders join or leave. This is possible only in an incorporated form of business as a company.
- Easy Transfer of Ownership - The shares of a company are considered movable property and are freely transferable. A shareholder can transfer shares to any person by just executing a share transfer form and handing over the share certificate of the Company. However, such transfer of share must be approved by the board of directors of the Company.
- Option to Sell the business The companies can be sold or transferred in its entirety, and the entire process of selling the Company is easy and straightforward. You must have seen many exits at a very high premium price to the potential buyer of the Company, for example, the sale of Flipkart to Walmart. We assist our clients in such restructuring of the companies.
- Company Can Own Property in its Name? Like a natural person, a private limited company can purchase, sell, own, possess, enjoy, and transfer property rights to anyone. Moreover, no personal or separate claim can be made upon the property of the Company by its shareholder as the Company remain in existence
- Easy to Raise Money Through Private Placement - Raising money in a proprietary concern, partnership, or LLP is complicated and cumbersome. A company can get investment from a closed group of people up to 200 shareholders by way of private placement is straightforward for a company. The Company can either allot new shares to the investors/angel investors at a price higher than the valuation of the stock. Since the companies act prescribes a clear and precise method to raise funds; hence this is a preferred choice for new startups.
- Foreign Direct Investment (FDI) - Traditionally the FDI comes to a company form of business, and The Indian companies may allot new shares to an overseas investor, or enter into a joint venture and create a new company for a specific purpose. When it comes to funding and FDI, the Company is the best choice.
- Capacity to Sue and to be Sued in Its Name. - Private Limited Companies enjoy the advantage to carry out legal proceedings and to bring a suit in the court of law. Just like any other type of person, a company being an independent legal entity, can initiate legal action against any other person and similarly can be sued in the court of law.
- Separate Legal Entity - The company is regarded as a separate legal person, that is a creation of law, and different from its owners, directors, and officers. The company comes into existence after an elaborate process of company incorporation is followed as per the provisions of the Companies Act, 2013, resulting in the issue of Certificate of Incorporation of the company.
