Nowadays there is a trend in the economy of starting their enterprise and want to have self-owned ownership and wanting to settle their startup. The decision of choosing the right business structure is important and considerably gets affected by factors such as -financial ability, number of owners, personal assets, and the objective of the business. But, still, it is advisable for a startup, to choose Private Limited Company, as he is just starting or incorporation of a company is done with new company formation with private limited company registration. A private limited company means that the company isn’t public, and it is managed or owned by a single person, family, or a group of people. A Private Limited Company is an accountable business entity and independently taxed. Every shareholder in a Private Limited Company has liability limited to his or her shareholding, and which is not “public” as defined by the Companies Act.
A private limited company registration (Pvt ltd Company) for your startup business is the easiest way to carry on business for an entity intending to make a profit with limited liability. Other than a limited liability and minimal statutory compliances, private limited company registration offer the following advantages:
- Separate Legal Entity
- Uninterrupted existence
- Limited Liability
- Free & Easy transferability of shares
- Owning Property
- Capacity to sue and be sued
- Dual Relationship
- Borrowing Capacity
Separate Legal Entity
A private limited company is a legal entity and a juristic person established under the Legal act. A juristic person is a person who is not a natural person or a human being but has a real distinct existence. Therefore a private limited company has wide legal capacity and can own property and also incur debts. A private limited company’s liability is independent of the members (Shareholders/Directors) of the particular company. In short, a private limited company is a legal entity financially separate from that of its members.
Uninterrupted existence
A company has everlasting concatenation that is continued without interruption until its existence legally dissolved. Private limited company registration is done as the company, being a separate legal juristic person can’t be affected by the death or any kind of departure of any shareholder member. a private limited company continues to be in existence irrespective of the changes in membership. Everlasting concatenation is the most important advantage of Private limited company registration.
Limited Liability
Limited Liability is another important benefit of registering a company as a Private limited company. A private limited company is legally responsible only to a limited amount for debts of the company. Unlike sole proprietorships registration and partnerships, the responsibility of the shareholders in the liabilities or debts of the Private limited company is limited up to the extent of the presumptive worth of offers taken up by them. So, if a company is limited by its shares, the liability of the members on a winding-up is limited to the amount unpaid on their shares.
Free & Easy transferability of shares
Shares of a Private limited company can transfer by a shareholder to any other person. The transfer is simple and effortless as compared to the transfer in partnership business transfers. Filing and signing a transfer of share form and handing over the buyer of the shares along with share’s certificate can easily transfer of shares.
Owning Property
Being a juristic person, Private limited company registration can buy and sell assets like properties, vehicles, etc. in its name. No shareholder doesn’t have any right on the property of the company as long as the company is a going concern. If the company is a Private Limited Company, shareholders are not the owners of the company’s property and the company itself is the true owner.
Right to go for legal proceedings
A private limited company can proceed against or to bring a suit in a court of law. It has all same value of one person who can bring a legal action in his/her name against another in that person’s name. A private limited company is an independent legal entity can sue and also be sued in its name.
Dual Relationship
With the incorporation of a company as a private limited company in the form of an organization, a company can make a valid and effective contract with any of its own members. The company can appoint employees and can work under a company. Also, a person who can at the same time be a shareholder, creditor, director and also an employee of the private limited company.
Borrowing Capacity
A private limited company can borrow funds, can issue debentures and can also accept deposits from the public. Even the banking and financial sectors welcome private limited company registration, to render large financial assistance rather than partnership firms or proprietary concerns.
With the company formation, as a private limited company, one upholds great advantages for a startup, by bestowing better results with great productivity output, which helps in growing the scale of operations of a company as a startup business.