WHY SHOULD YOU OPT FOR PRIVATE LIMITED COMPANY ?

Private limited companies can be established with any amount of capital. It would be advantage for someone having minimal resources in his hand and whose pocket won’t allow him to invest a large sum of money in setting up a business.Earlier Companies Act, 2013 prescribed a minimum paid-up share capital of Rs. 1 lakh for private companies, but amendment in 2005 removed this requirement. Private companies can now have a minimum paid-up capital of any amount.

The company can be formed with minimum 2 shareholders/members and maximum 200. More than two persons who own shares jointly are treated as a single member. The shareholder need not necessarily be an individual but it can be some corporate entity or any other artificial person.

When it comes to directors, a private company needs to have minimum two directors only. Thus, private company can come into operations involving very few people which makes it hassle-free and less complex. The most common question as to who can be a director in a company. Only an individual can be a director. Whether a salaried person can become the director in a private limited. Yes, a salaried person can also be a director. However, one needs to check the employment agreement if that allows for such provisions. In a lot of cases, employers are quite comfortable with the fact that their employee is a director in another company.

The liability of each member or shareholder is limited which means that if some company is in financial trouble, shareholders would not risk losing their personal assets. To simplify it, in the case of loan repayment, liability is divided among the members depending on how much they own towards the unpaid share value. Members shall not be personally liable i.e. they are not liable to sell their own assets for payment.

A Private Limited Company is a separate legal entity. It is distinct from its shareholders and directors which means that shareholders and directors are not accountable for the debts to be paid to the creditors of the company. Further, the company can sue or be sued by other parties in its own name. To simplify it further, a third party can file complaint against company or vice-versa without involving its shareholders or directors.

Private limited company shall continue to exist even after the owner dies or leaves the business. It shall continue to exist until it is legally dissolved.For example, a partnership firm usually dissolves with the death of one of its partners and same is the case with proprietorship firm which ceases to exist with the death of its sole proprietor.However, the Company can survive for ages. It is totally independent from that of its members. All the assets owned by the Company remain to be in the name of the Company irrespective of whether its shares are sold or whether its shareholders die. The membership of the company might change altogether, but that in no circumstance does not bring the company to an end.

A company can acquire property in its own name. Shareholders cannot make any claim upon the property of the company so long as the company is running. The company itself is the true owner.

The shares can be transferred by a shareholder to any other person. Thus, ownership in a private Limited Company can easily be transferred by executing a share transfer deed with the authorisation of the Board of Directors.

Tax slabs of a private company are considerably more attractive than a sole proprietor model, where the taxation would be based on individual tax slabs. Companies registered under Startup India Scheme get tax exemption for initial few years.

A private limited company can easily raise funds either from internal or external sources. The funds can also be borrowed from directors subject to certain compliances. Applying for loans from the bank is also convenient. The funds can also be raised from foreign sources through Foreign Direct Investment (FDI).

In case, the private limited company is facing losses or otherwise and the shareholders intends to close down the company, then the company can easily be shut after complying with minimal legal formalities.

A Private Limited Company can avail the benefits of Startup India Scheme after registration. Under the Startup India Scheme, you can avail lot of the benefits like raise the funds easily, subsidy for trademark registration & exemption from corporate taxes for initial few years.

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.

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

1. Limited numbers of members

2. Centralized Authority

3. Small capital

4. Restriction on transfer of shares

5. Restriction on public deposits

6. Stock exchange