What are the Advantages of Private Limited Company in India?

Introduction

India has seen a rapid increase in new businesses across industries in recent years. A private limited company (Pvt Ltd) is a popular business structure for profit making entities. This article shall dive in to help you know the various benefits that a Private Limited Company serves.

What is a Private Limited Company?

A Private Limited Company (Pvt Ltd) is a legally recognized business structure in India. It requires at least two directors and shareholders, with a limit of 200 members. It is a preferred choice for startups and growing businesses due to its authority and structured operations.

Basic Requirements for a Private Limited Company

These are a few minimal criteria to be followed to fall into a Private Limited Company:

• Registered Office: A physical address for official communication (not a PO Box). Must be in the business’s jurisdiction.
• Business Name: Must be unique, not offensive, and follow Companies House rules.
• Director: At least one director (16+ years old, not bankrupt or disqualified).
• Service Address: A legal contact address. This is public.
• Member (Owner): At least one shareholder or guarantor who owns the business.

Advantages of a Private Limited Company

The renowned structure Private Limited Company serves major benefits, including:

• Limited Liability: Shareholders invest a specific amount, limiting their responsibility and protecting their personal assets from business risks.
• Separate Legal Entity: The company operates independently of its owners, owning assets, entering contracts, and handling legal matters on its own.
• Easier Access to Capital: Private Limited Companies raise funds by issuing shares or securing loans, simplifying business growth.
• Uninterrupted Existence: The company continues operating even if shareholders leave or pass away, ensuring business continuity.
• Protected Business Name: Registration prevents others from using the business name.
• Flexibility in Income: Directors decide how to receive payments (salary or dividends), optimizing their tax liabilities.
• Easier Transfer of Shares: Shareholders can transfer shares among themselves, allowing flexible ownership changes.
• Dual Relationship: Shareholders can be both shareholders and employees.