A private limited company is lawfully formed that the shareholders only have limited liability and legal protection, but their ownership also has restrictions. Additionally, it is small for small businesses and privately held for them. When it comes to the liability of the shareholders, it means they hold the shares respectively and the shares cannot be traded publicly.
When you register PVT LTD in India, there are main advantages despite the limitations, especially if you are just a start-up. The company’s ownership is defined by its share capital, making it easy to transfer compared to a limited liability company.
Know more about the advantages of a PVT LTD company in India:
Table of Contents
Shareholders Have Limited Liability
The company’s existence is a separate legal entity from the members that form it. The liability is not the same as its company members. The liability of repaying debts and lawsuits the company incurs, does not lie on the owner. The company liability can have a division of main segments, which are limited liability, liability limited shares, limited liability by guarantee, liability that is limited by shares and guarantee, and unlimited liability.
In case the company experiences financial distress for any reason, the members’ personal assets do not have to pay for the debt because their liability is limited.
For instance, if the company takes a loan and cannot pay, the members will only pay what they own like an unpaid share value. If a member does not have a balance payable to the shares they hold, they do not have to pay any part of the company’s debt.
Raising Money Is Easy
It can be hard to raise money as a sole proprietor and small business. But since 2013, companies can already sell shares to the public or they may accept deposits from the public and raising money is easier compared to other structures of business. There are numerous ways of financing business that the company can do. In addition, because practical law governs companies, they must have full disclosure, so they can enjoy excellent credit worthiness with different financial centers/institutions.
There Is Perpetual Succession
Since a pvt limited company is a separate legal entity, based on the law, the company continues to exist even when there is death, bankruptcy, or insolvency. That means if your business is or partnership is proprietary, you are the same as your business.
However, the company registration process makes your business a separate legal entity and in terms of this business, you are separate from it. Therefore, if you incorporate or register a company, then your company will have a separate legal status. Therefore, the company’s life does not depend on its founders or members’ life.
Transferring Shares In Easy
The company’s shares are limited and transferable to anyone. If the business is private and limited, transferring is easy compared to transferring interest if the business is a partnership or proprietorship. The filing and signing of a share transfer form and handing buyer shares with a share certificate are easily transferable.
Trustworthiness
Any company in India must be registered under the Registrar of Companies (ROC) based on the Companies Act 2013. Any person can check the company’s details through the Ministry of Corporate Affairs (MCA). In addition, the director’s details are given with the company information. Therefore, a PVT LTD business structure is trusted more.
Taxation
Since people want their tax burden to be minimized, the company based on the income tax act 1961 has a main incorporation benefit with taxation. Most of the time, companies get a lower tax rate and are given better taxable benefits compared to other business organizations.
There Is Better Governance
The companies being governed by the Companies Act, 2013 and must follow different regulatory procedures over its governance. In addition, they must comply with the disclosure norms that are imposed, which makes for better governance over organizations and values creation for the owners.
These are the reasons why you must register PVT LTD company in India. Opening a company in India gives room for many opportunities to succeed your business’ future in India. You can get the services of 3E Accounting India to help you with India company incorporation.
