Why to form a Private Limited Company

 Start-up as a Private Limited Company

Setting up a business is the most rewarding and exciting experience for every interested entrepreneur. Furthermore, selecting the proper business structure is also an important decision because it has enduring implications throughout the life-cycle of your business. Hence, you are advised to adopt the highly appropriate entity which will support both the vision and objective of your business.

One of the most effective and renowned way to form a business entity is to incorporate a Private Limited Company. A Private Limited Company creates a professional image and boosts the business value. They are viewed as more established and reliable entity over the sole proprietor or partnership traders. Also, this form of entity provides a sense of security and trust to the investors and stakeholders choosing to use the business' services.

Some of the major benefits to form a limited company are as under:

Separate Legal Entity

A Private Limited Company has a separate legal entity from its members and shareholders. This means its existence is not subject to the death, retirement, etc., of its members and it will continue to exist until it is legally wound-up. It is also not tied-up to its promoter(s). This means that the company can own properties and incur debts. A Private Limited Company has the capacity to sue and be sued in its own name. The company can also borrow by issuing debentures and deposits or straightaway from the financial institutions.

Limited Liability

This is one of the core advantages of a Private Limited Company. As a Private Limited Company exists as a separate entity from its members, its liabilities would be separate from that of its members. The responsibility of the debts taken by the company would be of the company and not of the members. The liability of the members is only subject to the number of shares that they hold as opposed to the case of sole proprietorship or partnership, where the owners have to bear the entire burden of the debt.

Lower Tax Benefits

Private Limited Company makes tax savings in the form of lower corporate tax rates, payment of dividends to its shareholders and pension payment to its employees. Further, from time-to-time government also introduce some taxation reliefs to new start-ups based on their nature of business and geographical presence.

More Opportunities

If an entity gets registered as a Private Limited Company, it becomes a separate legal entity. This means that it is not attached to its promoter in any way and the promoter is free to chase more opportunities as the business progresses more and more. Therefore, getting registered as a private limited company gives way to a pool of opportunities which increase the growth prospects of the company manifold.

Easy Raising of Money

Easy and quick funding is the need for any business entity to grow quickly. Since Private Limited Companies are governed by strict laws, it increases their creditworthiness and the financial institutions lend money to them easily.

Convenient Transfer of Ownership

In a Private Limited Company, the shares and other interests of members are considered to be movable property. Hence, the shares can be transferred in a manner as provided in the Articles of Association of the company. The easy transferability of the shares of the private limited company makes it convenient for the members of the company to subscribe to or leave the membership of the company at any time.

Better Status and Talented Staff

The status of Private Limited Companies is very professional and adds to the goodwill of the business. These are considered to be well-established, creditworthy and investors have more trust in them as compared to the sole proprietorship. This also attracts more talented employees as professionals look for opportunities in well-established companies. Besides, both buyers and suppliers normally prefer a Private Limited Company to trade and also in most of the tenders there is a prerequisite to be a private company to be eligible to apply for the same.

Also, government’s initiative to promote ease of doing business has now removed various difficulties that cause extra cost & time to incorporate a Private Limited Company. In fact, now it takes less than a week to form a new company and that too from anywhere in the country.

So, with this article we wish you all the very best and start your business and contribute to the economy of our country with innovative ideas and strategies.

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