Private Limited Company is the most preferred business
structure for Start-ups and small businesses in India. It is relatively easier to register a private
limited company. Ministry of Corporate Affairs is the registering authority & if registered, gives
you rights for doing business anywhere in India & outside India. The hallmark features of a private
limited company are that it allows outside funding to be raised easily offering the possibility to
grow big & expand, limit the liabilities of its shareholders and enables them to offer employee
stock options to pull in top talent.
As per company law, a Private Limited company is a limited liability company with a minimum of two
and a maximum of 200 members. Although Private limited company has limited liability and a separate
legal entity, at the same time it has all the advantages of partnership namely flexibility, the
greater capital combination of different and diversified abilities, etc. Before opting for a private
limited company, one must keep in mind:
• That Private limited company’s shares are not listed on stock exchanges & hence, cannot be freely
traded.
• That the scope is limited due to restrictions in several shareholders but enjoys fewer legal
restrictions.
• That the word “Pvt. Ltd.” must be suffixed in the name.
• That at least one designated partner should be an Indian Citizen.
NO MINIMUM CAPITAL | No requirement of minimum paid-up capital required for starting a Private Limited Company. |
EASE OF FORMATION | A Private Limited Company can be easily registered and is easy to manage and run with less legal compliance's. |
BUILD A GREAT TEAM | Today, in the business world it is important to have the option of providing stock ownership or ESOPs to employees which can be offered only by Limited companies. |
SEPARATE LEGAL ENTITY | The biggest advantage of a Private Limited Company is that its identity is distinct from that of its members which ultimately limits the liability of members. A company is a separate person having its rights & Obligations enabling it to enter into contracts in its name, right to sue & be sued. |
PERPETUAL SUCCESSION | In case of the death of the owner or transfer of shares, your business won’t get affected as the company is considered as separate from its members. |
LIMITED LIABILITY | The greatest benefit of Private Limited Company is a limited liability. If any liability arises then its member’s assets remain unaffected; members are only liable for unpaid shares held by them and not more than that. Stakeholders are not liable for corporate debts and liabilities. |
GREATER FLEXIBILITY | A Private Limited Company is required to perform lesser legal formalities as compared to a Public Limited Company. It enjoys special exemptions and privileges under the company law. Therefore, in Private Limited Company, less number of compliance is required. |
SECRECY | A Private Limited Company is not required to publish its accounts or file several documents. Therefore, it is in a better position than a public company to maintain business secrets. |
ATTRACT INVESTMENT | Private limited companies easily accommodate equity funding as there is a clear distinction between shareholders and directors as well as limited liability. Venture capitalists and private equity funds prefer to invest in this structure. |
TRANSPARENCY & CREDIBILITY | Private Limited Company enjoys enhanced transparency as the information relating to a company is available in a publicly searchable database. Thus, able to win the trust of the general public & improve business credibility. |
EXIT PLAN | It offers the best type of exit plan for all promoters. Only the shares of a company can be sold or transferred to another entity without any hassles, while the business remains a going concern. |
GOING INTERNATIONAL | A private limited company allows FDI up to 100% through automatic route without any prior government approval. |
1. Self Attested PAN Card copy
2. Self Attested copy of any one of the Identity Proof(Voter's ID/Passport/Driver's License)
3. Self Attested copy of Address Proof in the name of the director (Any utility bill i.e., mobile bill/water bill/ electricity bill, or bank statement which should not be older than two months)
4. Passport-sized photograph
1. Rent Agreement (Notarised: For rented property)
2. Sale Deed/Property Deed in English (in case of owned property)
3. No-objection Certificate from the property owner
4. Latest Electricity Bill / Mobile or Telephone Bill / Latest Bank Statement/Gas Bill
Private Limited Company | Limited Liability Partnership | One Person Company | Partnership Firm | |
Preferred for | Start-ups | Professional Services Firms | Sole Proprietors | Small-medium sized businesses |
Limited Liability Protection | Yes | Yes | Yes | No |
Minimum Requirement | 2 Shareholders | 2 Designated Partners | 1 Director 1 Nominee |
2 Partners |
Fund Raising Options | High | Low | Low | Low |
Tax Advantage | Few | Most | Few | Minimal |
Statutory Compliance's | High | Low | High | Minimal |
Compliance Cost | High | Medium | Medium | Low |
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