Private Limited Company can be formed with a minimum of two members; this number can be extended up to two hundred members. A minimum of two directors is needed which can go up to fifteen. This form of business shares many similar traits with partnership firm. A total of two hundred shareholders is acceptable in a private limited company. A properly formulated registration procedure has been mentioned in companies Act. You may ask that why you should opt for Private Limited Company when there is LLP and One Person Company. There are some advantages of Private Limited Company below:
Advantages of Private Limited Company
- Separate identity: A private limited company is considered to be a separate legal entity. It has its own identity and very much recognised as a separate company under the law. Also, the company can own property due to this feature under its name. The company can sue and also it can be sued under its own name due to this very same feature.
- Stability due to Limited Liability: Private Limited Company has this feature of limited financial liability of all the shareholders. The liabilities are limited to their shares only. This feature protects the personal assets and income of shareholders at times of any financial crisis faced by the company. Also, it gives the company more liberty of taking risks.
- Long and continuity of Existence: Private Limited companies are not affected by the status of their own when it comes to their existence. Death or inability to continue if the owner does not hinder the proceedings of the company.
- Minimum requirement of shareholders and members: Only two members and two shareholders are required to incorporate a private limited company. This gives many Entrepreneurs an opportunity to set up their own company.
- Ease of Raising Funds: Shareholders allowed are up to two hundred and another two hundred members are allowed, this many numbers and the reputation of the private limited company makes it easier to raise capital funds in comparison to other forms of companies. Therefore, we can say the scope of expansion is greater when a private limited company is incorporated. Taking debts from banks and other financial ventures are quite easy too.
- Tax Advantages: They pay tax on taxable profits and are exempted from higher personal income tax rates.
- Flexible Relations: A person can act as a shareholder, a director and an employee at the same time when the private limited company is taken into consideration. They are considered reliable too.
At the end, we can conclude by saying that not the only private limited company is a common form of business but it has many advantages including more scope of profit and stability. This does not mean that it is an ideal form of business since it has its own disadvantages too. Though one can say that advantages of private limited company overrule the disadvantages.