Advantages and Disadvantages of Private Limited Company
Planning to start a business? There are many questions revolving inside your head. Some question that strikes everyone’s mind while starting a business. Whether to go for a private limited company or not? What are the pros and cons of a private limited company? Is it a good idea to go for a private limited company?
All these questions will be answered in this blog with the help of describing the advantages and disadvantages of a private ltd company. Let’s see your decision of private limited company registration in India is good or not.
What is Private LTD Company?
A private limited company is formed with limited liability as per the law and held by a small group of people known as shareholders. They register it for pre-defined objects. People with higher growth planning and startups mostly choose the private limited company as their business structure.
The liability we are talking about is limited as per the number of shares they hold and these shares cannot be traded publicly according to business and industrial law. As per section 2 (68) act defines the private company as-
- A business or company having a minimum paid-up share capital as prescribed by the law.
- There are restrictions on transfer of shares.
- Except in case of One Person Company, limits the number of its members to two hundred.
In India, a private limited company is the simplest and most common form of business registration. According to the provisions of the companies act 2013, the maximum number of members allowed in a private limited company is 50 and for private company registration in India, you can start with minimum numbers of two members.
If you are planning to form and registering a private limited company, you need to match the minimum requirements that are mandatory and must be checked while registering for the private limited company registration in India. Let’s see how it goes.
Minimum Requirement for Private Limited Company
According to the companies act section 2 (68), you should have match the minimum requirements for the registration of a private limited company in India.
- You must have minimum share capital of rupees one lakh.
- Minimum numbers of two directors are mandatory and they both should be adult.
- One of them should be India resident and India citizen.
- Two shareholders are required.
- Shareholders can be persons or an artificial legal entity.
- Minimum two and maximum 200 members are allowed in a private limited company.
Registration Process of Private Limited Company
Registration of a private ltd company is completely an online process that can be done easily with the help of expert advice that online registration websites provide. There is a form called SPICe+ (SPICe plus), earlier its name was SPICe.
Incorporating a private ltd company is easier and you can do it with an application for the reservation of name, incorporation, DIN (Director’s Identification Number), PAN, TAN, EPFO registration, ESIC registration, and opening of a bank account.
The SPICe+ is consist of two parts-
In PART A, you have to apply for the name reservation of the company. It is a type of approval for the name of the company.
In PART B, you have to apply for the services-
- DIN allotment
- Issue of PAN/TAN
- Issue of EPFO registration
- Issue of ESIC registration
- Issue of profession tax registration (if you are registering company in Maharashtra)
- Mandatory opening of bank account for the name of company
- Allotment of GSTIN
Advantages of Private Limited Company
Let’s make it easy for you to decide whether go for the private limited company or not with the help of advantages of private ltd company.
1) No Minimum Capital Needed
There is no minimum capital needed to form or incorporate private limited company in India.
2) Separate Legal Entity
A private limited company is said to be a separate legal entity according to the law because the assets and liabilities of the business are not the same as the assets and liabilities of the directors. Both of them are counted as different as the private limited company separates management and ownership. The managers are counted responsible for the success and they are also liable for the losses the company.
3) Professional Reputation of the Business
Running a business as a limited company creates a professional image and increases your reputation in the market because these types of businesses are closely monitored and analyzed than other structures in place. Registering your business as a limited company will help you in attracting new investors and also helps in competing in the market of your industry.
Disadvantages of Private Limited Company
1) Number of Shareholders and Members
If you have registered your business as private limited company, the number of shareholders cannot exceed the limit of 50 as per the law.
Talking about maximum members in a private limited company, you cannot exceed 200.
2) Restriction on Transfer of Shares
In a private limited company, transfers of shares by its articles are not allowed and these shares cannot be quoted in the stock exchange.
3) Cannot Issue Prospectus to Public
A private limited company is not allowed to invite public for subscription of shares, it means they cannot issue prospectus.
These advantages and disadvantages of private limited company can help you in binding your planning and making a decision whether you want to for the incorporation of a private limited company or you have to go for any other option available for the business.
Are you looking for Private Limited Company Registration in India?
If you have finalized your idea and want to take a step ahead for the registration and are you looking for Private Limited Company Registration in India? Visit ExpertBells, here you will get the secured and complete process written step by step. Registering your company will get more convenient as we provide expert support in order to complete your registration process whether it’s filling form or documentation, everything will be done superbly.
Apart from this we also provide assistance for the one person company registration, public company registration, registration & license for GST registration online, GST filling & other company annual fillings, trademark registration, and much more.
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