What is actually a private limited company, what are its advantages and disadvantages and should we register it before starting a company?

What is a Private Limited company?

• A Private Limited Company or Pvt. LTD Company, is a kind of privately held small business entity
• This kind of business entity limits proprietor risk or Liability to their shares 
• Also the Pvt. LTD Company confines the number of investors or Shareholders to 50 and restricts investors or shareholders from publicly exchanging shares

Advantages of Private Limited Company:

• Reduction in Liability:  

The main advantage for the investors is that, in the event of the company closure due to monetary issues, or if in the event that there is any misrepresentation, the proprietor will dependably have the privilege to secure his/her benefits/share capital

• Funding: 

A Pvt. Ltd company can get funds for their company through their friends and family by giving them equity shares. It syndicates both value and obligation assets to have an ideal capital structure

• Team building: 

By offering Employee Stock Options (ESOPs) to the employees a Pvt. LTD Company can bring ownership status to their employees

• Reliability: 

As the company is enlisted as a corporate substance, the believability is enhanced, and also it builds reliability in the market

• Perpetuity:

Even after the demise and exit of any investor or the founder, the firm proceeds and its reality is protected

• Foreign  Direct Investment (FDI): 

Foreign deposits/ investments through a simple channel are taken into account for a Pvt. LTD Company

Disadvantages of Private Limited Company:

• Registration  Process: 

The registration process is a bit hectic if directions or rules and regulations of the Ministry of Corporate (MCA) are not clear. It takes a minimum of 10-15 days for the total process or complete incorporation process which incorporates, the age of DSC, DIN, Certificate of Incorporation, Company PAN, AoA, MoA, etc.,

• Yearly Compliances: 

It is very critical to document the records at MCA every financial year. A Chattered Account, for the most part, deals with this, to document the assessments for your private constrained organization. All these services comes at an added cost

• Cannot be Listed in Stock Exchanges: 

The posting of the organizations for the first sale of stock is not possible

• Limited Shareholders: 

In a Pvt. Ltd company, the number of investors or individuals can’t surpass more than 50.

In the next article I will be talking about the other type of company registrations and which is suitable for startup companies.

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PK,

PK Enterprises.