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Benefits of Private Limited Company

A Private Limited Company is the most common form to carry on a business as an entity intending to make a profit and enjoy the benefits offered by it, particularly limited liability. It is a voluntary association of at least 2 and not more than two hundred members/ shareholders, whose liability is limited according to the shares held by them. The shares of a Private Limited Company cannot be traded on public exchanges and are not issued through an IPO; hence the shares of a Private Limited Company are held privately. The Companies Act, 2013 has granted a lot of privileges and exemptions to private companies to facilitate ease of doing business in India.

What are the Benefits of Private Limited Company?

Limited liability

When businesses face unforeseen financial crises and in the verge of closure, a pvt. ltd. company’s shareholders do not face the risk of losing their personal assets. Only the amount invested starting the business would be lost and that the Director’s personal properties would be safe.

Access to Funding

Private limited companies efficiently accommodate equity funding as there is a clear difference between shareholders & directors as well as limited liability. In fact, venture capitalists & private equity funds are unlikely to invest in any other structure.

Uninterrupted Company Existence

A company, being a separate legal person, is not affected by the death or other departure of any member. It continues to be in existence irrespective of the changes in membership. Perpetual succession is one of the most essential characteristics of this kind of company.

Owning Property

A company act as a juristic person, can acquire, own, enjoy and alienate, property in its own name. Shareholder of the company cannot make any claim upon the property of the company so long as the company is a going concern. The shareholders are not the owners of the company’s property. The company itself is the true owner.

Dual Relationship

In this company form of organization it is possible for a company to make a valid & effective contract with any of its members. It is also possible for a person to be in control of a company and be in its employment at the same time. So, a person can at the same time be a shareholder, creditor, director, and an employee of the company.

Borrowing Capacity

A company enjoys better pathways for borrowing of funds. It can issue debentures, secured and unsecured both and can also accept deposits from the public, etc. Even banking and financial institutions prefer to give large financial assistance to a company as compared to other form of business.

Easy to Exit

Private limited companies can easily sell or transferred, either partially or in full, to another individual or entity without any disruption to the current business.

Expanding Internationally

If a business is into developing products on a global scale and aiming to expand its operations across the world, then it is important to get investments and form collaborations with foreign establishments. One advantage of private limited companies here is that they allow for FDI up to 100% through the automatic route, which means there is no requirement of any government approval for foreign companies to make an investment in India. This is against Partnerships, LLPs which need acceptance from the government.

Scope of Multiple Opportunities

Successful entrepreneurs are always on the lookout for opportunities wherever possible and in different industries or sectors. Often, they are eager to grab the chances and test waters. Private limited companies have the scope of utilising the chances as the business grows over time whereas sole proprietorships and partnerships cannot take up as they are tied to the promoter.

Better governance

As private limited companies are regulated by the Companies Act 2013 and need to follow stringent procedures, disclose norms, comply with various legal requirements, they are more organized creating value for owners. Thus, a private limited company offers much more advantages than other entities.

Free & Easy Shares Transfer

The transfer is easy as compared to the other structure of business. The process of filing and signing a share transfer form and handing over the buyer of the shares along with share certificate can be a easy work.