What Is A Private Limited Company, And Why Choose It As A Business Structure?

A Private Limited Company offers limited liability, separate legal entity status, and restrictions on share transferability.

Key Features of a Private Limited Company:

1) Limited Liability: Shareholders' assets are protected from company debts or legal issues.

2) Separate Legal Entity: The company can enter contracts, own property, and sue or be sued in its name.

3) Ownership and Shareholders: Ownership is determined by shares, with a minimum of two and a maximum of 200 shareholders.

4) Transferability of Shares: Shares are subject to restrictions on transfer, requiring consent from other shareholders.

5) Management and Directors: The company is managed by directors appointed by the shareholders.

6) Regulation: Regulated by the Ministry of Corporate Affairs, adhering to the Companies Act, 2013.

Why Choose a Private Limited Company:

Reasons for choosing a Private Limited Company as a business structure.

1) Limited Liability Protection: Shareholders' assets are safeguarded from the company's liabilities.

2) Credibility and Trust: The "Private Limited" tag adds credibility and trust to the business.

3) Ease of Fundraising: Option to raise capital by issuing shares to investors.

4) Perpetual Existence: The company has stability and continuity, unaffected by changes in ownership or shareholders' death.

5) Professional Image: Associated with a professional and formal business image.

6) Employee Benefits: Offering stock options and other benefits to attract and retain talented professionals.

7) Transferability of Ownership: Provides a degree of flexibility in ownership transfer.

8) Access to Borrowing: Better access to borrowing and financing options.

9) Legal Framework: Subject to a well-defined legal framework, providing clarity in compliance requirements and governance.

10) Tax Benefits: Certain tax benefits and advantageous corporate tax rates.