Why choose a private limited company?
Private limited companies have always been an important part of any developing economy as they contribute to a major portion of the capital. Private Limited company go through a lot of misjudgment. When you hear the word “private company”, you usually think that a private company means a small company with little interest. Well, that’s not true. India is one of the most rapidly growing economies in the world and private limited companies have made substantial contribution throughout this journey.
10 Reasons to choose the private company over a public company.
In a public company, regulation and ownership of shares can be sold to the public on an open market. On the other hand, in a private company, shares can be sold or transferred to other people by the choice of the owner. Shares of such company are owned by founders, management or a group of private investors. Shares here are not sold in open market. Thus there will be less number of shareholders. This means less complexity and confusion in decision making and management.
- MINIMUM NUMBER OF SHAREHOLDERS
For a private company, a minimum number of required shareholders is 2, whereas, for a public company, you require a minimum of 7 shareholders.
- LEGAL FORMALITIES
Legal formalities are sometimes very expensive and time-consuming, aren’t they? If you’re planning to start a public company, you better be prepared because there is a long list of legal formalities for forming a public company. Private companies have comparatively shorter list.
- DISCLOSING INFORMATION
A public company is required to disclose their financial reports to public every quarter, as it will affect public investment; private companies are not subjected to any such compulsion.
- MANAGEMENT AND DECISION MAKING
Management and decision making becomes more complex and confusing in public companies as more number of shareholders are to be consulted. This complex procedure is eliminated in private company as the number of shareholders is less.
- FOCUS OF MANAGEMENT
Managers of Public Company are focused on increasing the value of shares, whereas managers of the private company are more flexible in the short term and long term business decisions.
- STOCK MARKET PRESSURE
Private companies are not pressurized by the stock market and you don’t have to worry about shareholder expectations and interference as long as they work within the law. Shareholders in public companies are focused on current earnings and they exert pressure on the company to increase earnings.
- LONG TERM PLANNING
Managers of public companies are pressurized to increase earnings in the short term in order to increase the value of their stock. Private companies can focus on long-term earnings as such pressure is eliminated.
- MINIMUM SHARE CAPITAL
You will be needing a lot of money for a public company. A public company requires minimum share capital of Rs. 5,00,000. For a private company, the earlier minimum number of share capital was Rs. 1,00,000, but now there is no such minimum compulsion. Therefore there is no pressure of fund requirements.
It is obviously not appropriate, for competitors to know about your business secrets.
Confidential information such as executive compensation, legal settlements, and other essential information cannot be kept reserved in public companies. Such information is more secure in a private company.
Therefore, a Private Company is less complicated compared to a Public company. It is comparatively less expensive and less time-consuming. The Following Private Companies of India have proved the fact that private Limited Company is one of the most successful businesses in India:
TOP 5 PRIVATE LIMITED COMPANIES IN INDIA
1- RELIANCE LIMITED INDUSTRIES
Started in 1966 by Dhirubhai Ambani, headquarters in Mumbai. It is an Indian company dealing with energy, petrochemicals, textiles, natural resources, and telecommunications. It is the 2nd most profitable company in INDIA.
The numbers of shareholders are approx. 3 million.
2- TATA CONSULTANCY
Founded in 1968 by J.R.D Tata and F.C Kohli. An Indian multinational consultancy firm with its headquarters in Mumbai. It operates in 46 countries. It is now placed amongst the “best 4” most valuable IT services in the world. It is on 64th rank in the Forbes’s most innovative companies.
It has a capitalization of $80 million.
3- HINDUSTAN UNILEVER LIMITED
Based in Mumbai, Maharashtra, HUL is an Indian Consumer goods company. 67% of HUL’s controlling shares are held by an Anglo-Dutch Company. It was Established in 1933 as Lever Brothers and changed the name to Hindustan Unilever Limited in 1956.
The Company’s Annual income is Rs. 30,170 Crore.
Established in the year 1945 by Mohammad Hashim Premji.
Its headquarter are situated in Bangalore, India.
Wipro’s market capitalization was $45 billion making it
seventh largest IT Corporation in the world
5- ITC LIMITED
Established in 1910 as Imperial Tobacco company of India and later renamed as I.T.C in 1974.
It completed 100 years in the year 2013. It has a market capitalization of $45 billion
Having its headquarters in Kolkata.