Top 5 benefits of Private Limited Company
Aug 02, 2019 Aarti
Top 5 benefits of having Private Limited Company
Starting a business can turn out to be one of the most interesting experiences of your life. One of the important decisions made by an entrepreneur or a start-up while starting this journey is the selection of his business entity. The choice of the business entity has long term implications throughout the life-cycle of the business. A Private Limited Company is the most popular as well as the most preferred choice of business entity in India. As it requires a minimum of 2 members, it is most appropriate for small and medium-sized businesses and start-ups. It is a privately held business entity with a limited liability and allows for a 100% foreign direct investment with government approval. It takes only around two weeks to set up a Private Limited Company​.
#Benefit No.1: Ease of formation
A Private Limited Company can be incorporated with minimum 2 directors by filing SPICe E Form INC-32 along with link form SPICe MOA (INC-33) and SPICe AOA (INC-34)​. Once the documents are verified, Certificate of Incorporation (COI) is issued to the company by MCA within 3 to 4 working days.
#Benefit No.2: Separate Legal Identity
A company is a separate person having its own rights & obligations. The identity of a Private Limited Company is distinct from that of its members. A company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No shareholder can make any claim upon the property of the company as long as the company is a going concern. The shareholders are not the owners of the company’s property. A company being an independent legal entity can sue and also be sued in its own name.
#Benefit No.3: Limited Liability
The liability of each member of the company is limited. If any liability arise then its member is not personally affected; members are only liable for unpaid shares held by them and not more than that. The personal, individual assets of the shareholders are not at risk. Shares of a company limited by shares can be transferred by a shareholder to any other person. The transfer is much easier as compared to the transfer of interest in a proprietary concern or a partnership.
#Benefit No.4: Greater Flexibility
As compared to public limited company, a private limited company is required to comply with lesser legal formalities and compliances. It also enjoys special exemptions and privileges under the company law. In a Private Limited Company, it is possible for the company to make a valid and effective contract with any of its members. It is also possible for a person to be in control of the company and at the same time be in its employment. Thus, a person can at the same time be a shareholder, creditor, director and also an employee of the company.
#Benefit No.5: Investment
Last but not least, A Private Limited Company has the flexibility to easily raise loans and investments from NRIs and foreigners. Best choice for venture capitalist and angel investors.
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