Running the business and making a profit out of it is only possible after the successful establishment. The decision to opt for the correct type of organization for your business becomes the crucial stepping-stone to attain the desired success. It can be demanding as you will have to check the pros and cons of the type of structure you want to obtain. Many startups prefer to register a private limited company in India regardless of its size and scale. This is because of the benefits it offers.
A private limited company is an entity that makes the sure broader scope of expansion and scalability of business after its set up and during its existence. Many companies running on a large scale have initiated their businesses from a small scale. And, if you are eyeing forward to take your operations on a large scale, incorporating a private entity is viable for a number of reasons.
#1. Number of Subscribers
First and foremost, any co-founder or originator of the business looks into the business. The number of individuals needed for registration and set up for the entity. To set up the private limited company, two members (shareholders) and two directors are require. Here, the beneficiary would be the person who subscribes to the company’s shares, such as directors and shareholders could be the same. This means that the same person can hold both the designations of shareholder and director simultaneously. Thus, the business can set up as a private entity with minimum requirements for individuals.
#2. Capital requirement
The startup always looks for the minimum capital requirement as the funds are limit for new arrivals. During, The private limited company registration does not need any minimum amount of paid-up capital to introduce at the time of the company’s incorporation. Nonetheless, the company’s authorized capital is keep at a minimal Rs. 1 lac only.
#3. Recruit separate management
The separation of both ownership and management can possible in the case of a private limited company. Where the owners cannot offer full-time for the business after online registration of the company, the owners can recruit directors for the company, who would be able to take the task and be responsible for the day-to-day management and operations of the company.
#4. Separate legal entity
At the end of incorporating a company, a separate legal entity comes into existence as per the law. The elements of a separate legal entity will be born in the eyes of the law. The aspects of a separate legal entity are the profound advantage allocated by this organization. Under this element, the company’s legal existence would differ from its owners and management. Due to separate legal existence, the company can own and hold the assets in its name. And no right of owners can execut over the company’s assets. Also, the owners cannot liable for any actions taken by the company unless caused by fraudulent or mala fide intentions with owners’ involvement.
#5 Limited Liability
Having a separate legal existence, the company will be only responsible for paying off the liabilities and debts of the company. The owners will unaffect by the company’s liabilities. However, The shareholders’ liabilities will limited up to the unpaid number of shares owned or the amount guaranteed (in the case of the guarantee company). But limited liability is the biggest sigh of relief to the owners of the company.
#6. Perpetual existence
The private limited company has its own identity separate from its members, as clarified above. By virtue of this element, the private limited company, as registered under the Indian companies act, 2013, has perpetual existence with a separate legal identity. Change in the numbers of the company members does not impact the company’s existence. The company’s existence can end only through the liquidation process as stated under the law.
#7. Ease of fundraising and high credibility
A private limited company is more credible in the market than in other forms. Due to its applicability of robust provisions to follow for private limited company incorporation with the certificate and guidance of the experts. It leads to transparency in transactions and aids the reliability of financial institutions. Also, the involvement of more than 200 members makes it easy to infuse funds from internal sources to raise organizational capital.
#8. It can sue and be sued
As the capacity to hold the company’s assets, the company can also start a legal process against any third person in its name, and a third party can also file suit against the company.
The aspects mentioned above make it clear that a private limited company offers significant advantages over other business structures. This is compared to other entities in the market, and that is why it is currently dominant.