Benefits of Private Limited Company Registration

Benefits of Private Limited Company Registration

Benefits of Private Limited Company Registration

Private Limited Company Registration in India Comes with the following Benefits:

Separate Legal Identity: Private Limited Company is an entirely separate legal entity. It has its own independent legal existence separate from its directors and shareholders.

Limited Liability: A private limited company has limited liability. It means the owner's liability is limited to the amount that they have invested in the company. This protects the shareholders' assets from the liabilities of the company.

Power to sue and be sued: The company, because of its separate legal existence, has the power to sue and be sued in its own name by any person.

Transferability of shares: The shares in a private limited company can be transferred easily by the shareholders.

Tax benefit: Private limited companies have a lower tax rate as compared to the other forms of businesses like a partnership or Limited Liability Partnerships. Even the sole proprietors with slab benefits fall under the 30% tax rate for income above Rs. 10 lakhs. Partnership firms and LLPs come under a flat tax bracket of 30% while private limited companies have multiple taxation rates of 15%, 22%, 25%, and 30% as per the applicable sections of the Income Tax Act, 1961.

Perpetual Succession: A private limited company has a perpetual succession. The company remains in existence until its objects are fulfilled or are dissolved voluntarily or by compulsion of law.

Facilitates funding: Company is the most preferred structure for fundraising from prospective investors and financial institutions. Even in the case of startups, a company is the preferred constitution format for the investors.

Ownership and Obligations: The company has the right to own the assets and owe the liabilities in its own name.

Eligibility for Private Limited Company

While there are no specific eligibility criteria for Private Limited Companies, certain thresholds have been set with respect to certain parameters. These are:

Shareholders: There shall be a minimum of 2 shareholders and a maximum of 200.

Directors: A private limited company shall have a minimum of 2 directors and a maximum of 15 directors.

Capital: There is no minimum paid-up capital prescribed so far. Earlier, the Minimum Paid-Up Share Capital Requirement of Private Limited Company was Rs. 1,00,000 which has been omitted in 2015.

DIN:Each person undertaking to be appointed as director of the private limited company shall have a valid Director Identification Number (DIN).



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