Before starting a business, we have many things on our mind, a question that comes to everyone’s mind is whether or not to include a private limited company. What are the benefits of pvt ltd company in chennai? Read to know more!
Private Limited Company
A private limited company is legally set up with limited liability or legal protection to its shareholders, but it restricts its ownership.
A private limited company is a company that is kept private for small businesses. The liability of the members of a private limited company is limited by the number of shares they hold respectively. Shares of a private limited company cannot be traded publicly.
Pvt Ltd is the simplest and most popular form of business registration in India. It can be registered with at least two people. Securing limited liability to shareholders, the ability to raise equity funds, the status of a separate law firm, and the highly recommended business type for millions of small or medium-sized businesses owned or operated by family.
The minimum requirement for a private limited company
- Two adult directors
- One of the directors of a private limited company must be an Indian citizen and an Indian resident.
- The other director (s) may be a foreign national.
- The company must have two shareholders.
- The partners are natural persons or an artificial law firm.
- Private Limited Company Registration Process
- Registering a private limited company in India is a completely online process. MCAA recently replaced the previous spicy design with a new web form called Spice +. So, now it is very easy to register as a private limited company.
You can now enrol in a private limited company with a single application for name booking, consolidation, DIN allocation, PAN, DN, EPFO, ESIC, business tax (Maharashtra) and bank account opening.
Spice + is divided into the following two parts:
- Part A: Apply for booking the company name in Form Spice + Part A of the form. It can be used to authenticate the name of the proposed company and to file the company record at the same time.
- Part B: In Part B of Spice +, apply for the following services:
- DIN Assignment (Director Identification Number)
- Pan card
- TAN card
- EPFO registration
- ESIC registration
- Business Tax Registration (Maharashtra)
- Mandatory opening of a bank account for the company and
- GSTIN (if applicable)
Advantages of a private limited company
No minimum capital
No minimum capital is required to create a private limited company. The value of a private limited company is Rs. 100,000 as authorized share capital.
The private limited company has a unique legal identity in court, i.e. the assets and liabilities of the business are not the same as the assets and liabilities of the director. Both are considered separately. A private limited company differs from management and ownership, thus managers are responsible for the success of the company and the losses of the company.
If the company goes into a financial crisis for any reason, the personal assets of the members will not be used to pay off the company’s debts as the individual’s liability is low.
E.g. If a private limited company is unable to repay any loan, the members have how much they own to their own shareholders, i.e. the value of the unpaid shares. This means that if you do not have the amount to pay the outstanding shares, you are not liable for any debt paid by the company even if the loan/loan amount is not paid.
A private limited company in India is a form of business other than public limited companies that can raise money from venture investors or angel investors.
Converting shares free and easy
The shares of a company limited by shares may be transferred by the shareholder to any other person. Exchange is easier than changing interest in a business run as owner concern or partnership. The shares can be easily exchanged by filing and signing the stock transfer form and handing over the stock certificate to the buyer.
A private limited company has a “chaotic success” that lasts or continues until it is legally dissolved. No company, as an individual legal entity, is affected by the death or other expulsion of any member, but without membership change, it exists. ‘Permanent success’ is one of the most important characteristics of a company.
Foreign direct investment is allowed
In a private limited company, 100% foreign direct investment is allowed, i.e. any foreign company or foreign person can invest directly in a private limited company.
Company details are available in the public database. This improves the credibility of the company because it makes it easier to standardize the details
Disadvantages of a private limited company
- The main disadvantage of a private limited company is that it restricts the ability to convert shares through its articles.
- Under no circumstances should the number of shareholders in a private limited company exceed 50.
- Another disadvantage of a private limited company is that it cannot publish opportunities in public.
- Stocks in the stock market cannot be avoided.