Private Limited Company: What are the Perks of Running One?

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There are different perks of having your own company and the perks of private limited type of company over all other kinds of businesses like proprietorships, partnership firms, even Limited Liability Partnerships, One Person Companies, and public limited companies, has made it the most desirable preference among young startup owners. Once you finish reading this post, you would know what exactly you can gain by having a private limited company!

The point is there are manifold perks of Private Limited type of Company over other types of business entities. Private Limited businesses are not just easy and affordable to incorporate, but even carry credibility as legally incorporated entities. Apart from this , they are exempted from numerous mandatory legal compliances under the Companies Act 2013. Moreover, being a legal entity, they also relish the power to sue third parties in a court of law. Moreover, features such as limited liability for owners, a full separation between ownership, business, and even management, and no least requirement of authorized capital for setting up the business, make private limited type of companies an affordable and even profitable venture to form up and operate.

There is Limited Liability

You know limited Liability is the foremost among the many perks of private limited type of companies. Unlike proprietorships, and partnerships, private limited option exist as separate legal entities from their shareholders. Neither do the shareholders pocket all the advances nor are they accountable for all the losses of the company. The income as well as the liability of the company get distributed among all shareholders as per a predetermined ratio, agreed upon by the unanimous consensus of all shareholders, even prior to the incorporation of the company. Limited liabilities for shareholders are not just a fascinating feature for investors but even a characteristic that offers them with immunity against financial impoverishment, in moments of crisis. Hence, this turns out to be one of the prolific perks of Private Limited type of Company in the country.

Banks and Financial Institutions prefer it

Private Limited type of companies are definitely the entities that demand mandatory registration with the Registrar of Companies that too under the Ministry of Corporate Affairs. The procedure of registration is mainly governed by the Companies Act 2013 and even the Company Incorporation Rules 2014, coupled with manifold other provisions given in statutes such as the Trademark Act, Names and even Emblems Act, GST Act, Income Tax Act, EPF Act, ESIC Act, Shops and even Establishment Act, Contracts Act, SEBI Act, and more.

Registrations, certificates, approvals, and licences obtained under all these acts, helps the government in upkeeping publicly accessible databases including relevant information about the companies. This improves the credibility of private limited type of companies, as government databases carry absolutely reliable and verified information about them. Therefore, investors and creditors stay assured that their pennies are landing in safe hands.

On the other side , businesses such as proprietorships and partnerships that stay unregistered, compromise their credibility, as their existence cannot be simply discovered on any government databases or even registers. Credibility among investors is somewhat one of the main perks of Private Limited type of Company.

A good debt Capacity

A private limited type of company has more borrowing options than that of an LLP. Bank loans are not just easy to obtain (in comparison to opcs and even llps), but the option of issuing overall debentures and convertible debentures is always out there or available to private limited type of companies.

Fascinating to Investors

Private Limited type of Companies are fascinating for investors owing to its high potential for growth and historical records of success in the realm of Indian market. Further, a Private Limited type of company is a popular name in the domestic and even Indian market, and sounds more convincing to entrepreneurs looking forward to making it huge in their respective industries . Some of the huge business brands and industrial monopolies are all Private Limited type of Companies. Perhaps, it is exactly why a private limited type of company is considered as the finest choice of business structure for startups.

Huge credibility

A private limited type of company must make a lot of information about its structure, even operations and financials available to the Registrar of Companies. Such an information ends up in the overall public domain.

Continuous Existence

The life of a company does not really rely on the life of its owners, as a company has a legal sort of identity of its own. This means that a private limited type of company shall go on to exist even after the death, resignation, retirement, even removal, insolvency, or proven insanity of a shareholder. It shall just stop to exist when wounded up or it has been voluntarily dissolved. The reason for the perpetual type of existence of a company depends in the fact that it can have as many as two hundred shareholders at a time. Apart from this, the shares they hold can be really transferred to fresh owners, in case of their departure from the overall company.

Such a feature of a private limited type of company is different from business entities such as proprietorships or partnerships, where the business and even the owner are one and the same, in the eyes of law. The death or even departure of a proprietor or partner simply means an immediate dissolution of their respective businesses. Apart from this, after the death of any of the partner, the partnership deed of a firm automatically dismisses. Among the numerous perks of Pvt ltd company, this perk assures its unlimited existence.

Low Income Tax

Well, you know the Section 80IAC of the Income Tax Act offers 3 successive financial years as tax holidays for shareholders of the startups that are registered either as a private limited sort of company or an LLP. A low cost load of legal and tax compliances is one of the most critical perks of Private Limited type of Company.