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Introduction of Private Limited Company
A Private Limited Company Registration in Jaipur is a company that is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the number of shares respectively held by them. Shares of Private Limited Company cannot be publicly traded. All the aspects of a Private Limited Company are discussed in the article.
Characteristics of Private Limited Company
1. Members– To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
2. Limited Liability– The liability of each member or shareholder is limited. It means that if a company faces a loss under any circumstances, then its shareholders are liable to sell their assets for payment. The personal, individual assets of the shareholders are not at risk.
3. Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.
4. Index of members– A private company has a privilege over the public company as it doesn’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
5. Several directors– When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operation.
6. Paid-up capital– It must have a minimum paid-up capital of Rs 1 lakh or a higher amount which may be prescribed from time to time.
7. Prospectus– A prospectus is a detailed statement of the company affairs that is issued by a company to its public. However, in the case of a private limited company, there is no such need to issue a prospectus because the public is not invited to subscribe to the shares of the company.
8. Minimum subscription– It is the amount received by the company which is 90% of the shares issued within a certain period. If the company is not able to receive 90% of the amount, then it cannot commence further business. In the case of a private limited company, shares can be allotted to the public without receiving the minimum subscription.
9. Name– All private companies must use the word private limited after their name.
Benefits Of Private Limited Companies
When it comes to starting a company, there are a few options to choose from. The most common are Sole Trader, Partnership, and Private Limited Company. There are many advantages of a private limited company, so it is the most popular option. Here we will be discussing the benefits of a Private Limited Company.
- Limited Liability
The most significant advantage of a private limited company is that the owners have limited liability. This means that the shareholders’ assets are protected if the company goes into liquidation. If the company goes bankrupt, the owners are only liable for the amount they have invested in the company. Any company’s money remains with the company and does not fall on the owners’ shoulders. This can be a significant advantage for new businesses as it protects their assets from potential business failures. One of the key benefits of setting up as a private limited company is limited liability.
- Tax Efficient
Private limited companies are tax efficient as they can claim corporation tax relief on their profits. This can be a significant saving for businesses and increase profits. In addition, private limited companies can pay dividends to their shareholders, which are also taxed at a lower rate. In addition, there are several other tax advantages available to companies, such as capital allowances and R&D tax credits.
- Separate Legal Entity
A private limited company is a separate legal entity from its shareholders and directors. This means that the company can contract with other businesses and individuals and is liable for its debts. In other words, creditors cannot seek direct payment from the personal assets of the business’s owners in case of debts or bankruptcy on behalf of the business. The only money that can be claimed directly in the company’s obligations and not those incurred by its owners on behalf of the business is shareholders. This can be essential protection for the shareholders as it limits their liability.
- Easier to Raise Capital
Raising capital for a business can be challenging, and private limited companies are becoming increasingly popular as they attract investors into the business more due to their credibility. This can be done through issuing new shares, taking out loans, or issuing bonds. In addition, it is often easier to approach high-net-worth individuals for funding when operating under a private limited company. This is because these potential investors do not require an active role in the day-to-day management of the business, unlike shareholders in public companies.
- Easier to Maintain
As private limited companies have become increasingly popular, much online accounting software has incorporated these features into their systems, making maintaining finances extremely easy with options to set up unlimited bank accounts, classes, income, and expenditure items. These include filing annual returns and reports with Companies House, holding shareholders’ meetings, and keeping proper company records. In addition, private limited companies must appoint at least one director and one company secretary. This can be helpful for small businesses that do not have the time or resources to manage all the administrative tasks themselves.
- Flexible Management Structure
Private limited companies are famous for sole traders or small businesses that do not have the resources to set up a public limited company. This can be advantageous for companies who want to keep control of their operations within a small group of people. With private limited companies, the owners are given complete control over managing the business. This can be achieved easily through online systems such as ‘Free Agent.’ This also allows shareholders to manage the company via an incorporated board of directors and appoint committees where necessary.
- Professional Image
A private limited company gives a professional image to businesses, which can be important when attracting new customers or investors. It also shows that the industry is established and has longevity. This is because private limited companies are more credible and established than sole traders or partnerships. In addition, private limited companies often have their website and letterhead, giving customers and suppliers a sense of trust in the business.
- Protection from Creditors
As mentioned earlier, one of the critical benefits of a private limited company is that it offers protection from creditors. This is because the company is a separate legal entity from its shareholders and directors. If the company goes into debt or bankruptcy, creditors cannot seek direct payment from the personal assets of the business’s owners. This can be essential protection for the shareholders and directors as it limits their liability.
This means that if the company goes bankrupt, the owners are not personally liable for any money owed by the company. This can be a significant advantage for businesses struggling as it gives them some breathing room and time to reorganize their finances without worrying about personal repercussions.
Overall, Private Limited Company Registration in Jaipur offers several key benefits which can be extremely useful for businesses of all sizes. By incorporating and adhering to the relevant formalities, companies can enjoy limited liability, tax advantages, and more significant business credibility. In addition, private limited companies are much easier to raise capital from shareholders and third-party investors. With all these benefits in mind, it’s easy to see why this company is so popular amongst entrepreneurs and small businesses.