Before starting a business it is important to decide the objectives of the company, the business structure, and the operations based on which the company has been chosen. The private limited company is a privately held entity and is preferred by most entrepreneurs. The Private limited company registered in India can have 50 shareholders and limit the liability of the owner to their shares and restrict from publicly trading the shares.
When the businesses see unseen financial crises and are on the verge of closure, the shareholders of the private limited company do not face the risk of losing their assets. Only the amount that is invested while starting the business is lost and the director's assets are safe.
The private limited companies easily accommodate the equity funding as there is a difference between the shareholders and directors. Venture capitalists and private equity funds are likely to invest in any other structure.
The private limited companies in India enjoy the privileges of borrowing more funds than the LLPs as there are more options of taking debt. Banks help in assisting with financial aid to the private limited companies than the OPCs and the LLPs as the debenture issue and convertible debentures are always available. The banks and the financial institutions welcome the private limited companies better than the partnership entities.
A private limited company is required to make a lot of information about the structure, operations, and financials available to the Registrar of the companies. This information ends up in the public domain. Therefore the vendors, lenders, employees can find the information that is relevant to the company such as the authorized capital, name of directors, registered office, etc. This information makes the businesses more credible than the entities that done furnish this information.
Private limited companies in India can be sold or transferred, either partially or in full to other individuals or entities without any disruption to the current business.
If the business developing product on a global scale and aiming for expansion of operations across the world, then it is important to get the investments and the form of collaborations with foreign establishments. One of the advantages of the private limited companies in India is that 100% through the automatic route, which means there is no requirement of any government approval for foreign companies to make investments in India. The partnerships, LLPs need acceptance from the government.
Successful entrepreneurs are always on the lookout for opportunities wherever they are possible. The private limited companies have the scope of utilizing the chances as the business grows over time whereas the sole prop[rietorshiips and the partnerships cannot take up as they are tied up.
As private limited companies are regulated by the Companies Act 2013 and are required to follow all the stringent procedures, disclose norms, and also comply with the various legal requirement, they are more organized in creating value.
A private limited company offers many advantages over other entities, it is always best to get the registration done by experts to avoid any discrepancies.