Operating a Private Limited Company is
the most popular and easy business process in the corporate world. The private limited company is a successful business model in India. The
business owners hold all shares of the company privately. Shareholders may
operate the business themselves, or hire directors to manage the company on
their behalf. Forming a private limited company results in protection of
personal assets, access to more resources, financial assistance and greater tax
cuts.
Following are the merits/advantages of
Forming Private Limited Company
1.
Continuity
of Existence: The Business of the company will not
affected by the status of owner
2. Only
Two Persons are required: For formation
of Private Limited Company only two persons are required to become first directors
as well as shareholders of the Company. The two persons who has stayed in India
for a total period not less than 182 days in previous calendar period can
appoint as directors.
3. Minimum
Share Capital only Rs. 100000/-: There is no requirement to invest huge amount for formation of a Company,
with a capital of Rs. 1,00,000/- a Private Limited Company can be formed. The
company can raised capital from Maximum 200 members.
4. Limited Liability: The liability of the member are
limited, transfer of shares is limited and restricted to invite general public.
This is the biggest benefit any private company can enjoy. In future, if the
company goes through financial turmoil, the assets of shareholders and business
are protected.
5. Tax
Advantages: Forming a
company instead of continuing as a sole trader or sole proprietor opens the
door to more tax-deductible costs and allowances redeemable against profits. Private
limited companies enjoy tax advantages in addition to limited liability. These
companies pay corporation tax on their taxable profits and tend to be exempt
from higher personal income tax rates.
6. Separate
Legal Entity: The
private company is legal entity which is established under companies act. It
has wide legal capacity and can own properties without any limitation.
7. Finance
and Resources: With adequate
funding, your company can produce goods at a lower cost, thus increasing
profits and customer satisfaction. The future of the business becomes more
secure.
8. Business
Continuity: Private
limited companies enjoy permanent succession because the company is its own
legal entity. In the event of a death or resignation, the company’s Articles of
Association allocate the shares to remaining members. Shareholders and
employees act “as agents of the company,” therefore, do not effect the company
if they leave. Discontinuation of the company only occurs through liquidation
or similar means.
9. Boosting
of Professional Status:
As a private limited company, it enjoys a good value in the market. These
companies are established and hold credibility in the market. More and more
national and international companies show keen interest on doing business.
10.Continues to Exist: The company continues to run, even if
the members die or dissolve it due to loss or certain reasons. In other words,
it has perpetual succession and run until it is legally dissolved by the
members. This is considered as important characteristics of forming a company.
11.Scope of Expansion: Private companies can raise capital
from individuals or investment companies for further expansion.
