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.