Importance Of A Private Limited Company In India | Ebizfiling

 Introduction 

 

Many questions come to the mind when launching a new business or enhancing your existing company. One of the most challenging processes is choosing a corporate identity for your company. A Private Limited Company is the most preferred type of business form among the aspiring entrepreneurs and top solo business dealers in the country like India. It is one of the most significant corporate legal identities in India. However, it is essential to know the importance of a Private Limited Company before registering your company as a Private Limited Company in India. In this blog, we will go through the importance of Private Limited Company.




 

 What is a Private Limited Company?  

 

A Private Limited Company is a company where the shareholders enjoy the feature of limited liability i.e., each shareholder is liable or accountable for the part of share he owns and the members are restricted to transfer the shares to the people outside the company. The registration and other compliance of a Private Limited Company are governed by the Companies Act, 2013.

 

 Importance of a Private Limited Company 

 

Easy to raise funds

 

The maximum number of shareholders and members of a Private Limited Company is 200 members. These massive numbers of members in Private Limited Companies make it easier for them to raise funds as compared to other types of business form.  Therefore, we may conclude that the scope of expansion is greater when a Private Limited Company is formed. It is easier for companies to get loans from the banks and financial institutions.

 

Dual relationship

            

Under the company form of organization, a company can enter into a binding agreement with any of its members. It is also possible for a person to be the CEO of a company and work for it at the same time. As a result, a person can simultaneously hold the offices of director, shareholder, employee, and creditor.

 

Separate Legal entity

 

The members and shareholders are different from the company, indicating that the Private Limited Company is a separate legal entity. As a result, in the situation of debts or bankruptcy none of the members, or directors are liable to pay on the behalf of the company.

 

Uninterrupted existence

 

As mentioned above, the company continues to exist as a separate legal entity until it is officially dissolved or winds up. Further, it continues to run even after the death or removal of any of its members. As compared to other business entities, the share transfer process of the Private Limited Company is less complicated.

 

 Key takeaways 

 

In the eyes of law, a Private Limited Company is a separate legal entity that prohibits the transfer of shares, has a maximum limit of 200 members, and members are liable for the shares they hold. A Private Limited Company can be incorporated in three different ways that are a Private Company limited by shares, unlimited company, and a company limited by guarantee. The growing number of start-ups and companies has boosted the importance of a private limited company in India.

 

 

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