WHAT ARE THE LIMITATIONS OF PRIVATE LIMITED COMPANY ?

The common disadvantage of private limited company is that its members are limited to 200. As the upper limit is restricted, it creates some disadvantages for the company because when the company needs another or more experienced and skilful owners, it has no option to expand the business.

As the private limited company is usually a small privately held company, the power and responsibility of managing the organization is confined into the hand of few members of the board of directors. The owners who are not related to the operation or management of the company may sometimes be deprived of their rights.

Private limited company is usually a small scale business and the amount of capital is not huge. Thus it stands as a major problem for the company as it cannot utilize its future possibilities only because of the lack of proper financing.

Share transfer in a private limited company can be restricted by its Articles of Association. Thus, shares of private limited company are not flexibly transferable and can be restricted by its Articles of Association.

Private limited companies are strictly prohibited from accepting public deposits as per section 2(68) of the Companies Act, 2013. Thus, Private Limited companies neither allot shares in public nor accept deposit from general public. It stands as a disadvantage because when the company is in need of huge funding for expansion of its business, it cannot accept deposits from public unlike public companies.

Being a private limited company, its shares cannot be quoted in stock exchange unlike public company.

An individual wants to launch a business however, confused about the kind of legal structure of business he should opt for. His decision is going impact on how much money is required for launching business, cost of registration, amount of paperwork, how much he has to pay in taxes and personal liability he will have to face. While making such decision, Private Limited Company is likely to jump in his mind first. Private Limited Company is the most popular option to start a business.

1. No minimum capital required

2. Shareholders/Members

3. Directors

Private companies are of three types depending on their members’ liabilities:

1. Limited by shares

2. Limited by guarantee

3. Unlimited liability

LIST OF DOCUMENTS REQUIRED (IN CASE DIRECTOR/SUBSCRIBER IS INDIAN):

1. ID proof

2. Address proof

3. Passport size photograph of subscribers for MOA and AOA

4. Registered Office Proof

DOCUMENTS REQUIRED FROM FOREIGN NATIONAL

1. ID proof

2. Declaration by foreign national

1. Apply for Name of the company

2. Apply for DSC

3. Apply for registration

4. Certificate of Registration