9 Private Limited Company Benefits You Should Know

Private limited companies are one of the most popular forms of business structure in India. In fact, there are several private limited company benefits such as flexibility, low risk and cost-effectiveness.

 

A private limited company can be set up by anyone. It just requires a minimum of two people. 

 

Any existing business can also transform itself to a private company. 

 

Here are the 9 benefits that a private limited company offers :- 

 

1. Limited Liability
2. Tax Efficiency
3. Separate Legal Entity
4. Easier to Raise Capital
5. Effortless Maintenance
6. Flexible Structure
7. Professional and Trustworthy Image
8. Protection from Creditors
9. Easy Share Transfer

 

Limited Liability

 

A private limited company registration online in India offers several benefits, one being the liability protection offered by it.

 

Thus, if the company goes bankrupt, the shareholder's personal assets will not be harmed. The shareholders will only be liable for the amount they invested in the company.

 

In other words, there is no burden on the owner’s personal assets for the damages caused by the business activities of the company. Thus, their personal wealth remains safe.

 

Tax Efficient

 

A private limited company can claim corporation tax relief on their profits, making them tax efficient. 

 

As a result, they may save a lot of money and see an increase in earnings. 

 

Companies can also take advantage of a number of additional tax benefits, including capital allowances and R&D tax credits.

 

Separate Legal Entity

 

A private limited company in India is a separate legal entity that has its own share capital and owns its assets and liabilities.

 

It implies that the business can enter into agreements with other companies and people and is responsible for its debts. 

 

In other words, in the event of indebtedness or bankruptcy of the firm, creditors cannot directly pursue payment from the personal assets of the business owners.

 

Moreover, it reduces their responsibility and can be a crucial form of protection for the shareholders.

 

A private limited company can be formed by an individual, a group of individuals or by a partnership. 

 

Easier to Raise Funds

 

Private limited companies in India can easily raise funds from various sources like banks, private equity and venture capital firms. 

 

It is possible because of the following reasons:

 

• The company benefits from a tax exemption for equity investments.
• There is no restriction on the number of shares that can be issued by the company.
• There are no restrictions on the number of shareholders that can be issued by the company in a single day or a year.
• The company has an easy exit route through an initial public offering (IPO) which enables it to raise funds without diluting its shares to investors and also helps it grow faster than other companies in India.
• The government of India offers various incentives for setting up a manufacturing plant or research and development center in India, resulting in giving more growth potential and support.

 

Effortless Maintenance

 

A Private Limited Company in India is easy to maintain because it has fewer formalities and is also tax-free for the first three years.

 

With opportunities to set up unlimited bank accounts, classes, income, and spending items, a lot of online accounting software has incorporated these functions as private limited companies have grown in popularity. 

 

It makes managing finances quite simple. 

 

These include convening shareholders' meetings, submitting yearly returns and reports to the government, and maintaining accurate company records. 

 

In fact, small firms that lack the time or resources to handle all of the administrative responsibilities themselves may find this useful.

 

Flexible Structure

 

The Private Limited Company in India is one of the most popular business entities because it has a flexible structure and allows for easy expansion.

 

It provides flexibility to the company regarding its legal and tax status.

 

Also, for sole proprietors or small firms, private limited companies are the best go-to option. 

 

Moreover, companies that desire to keep control of their operations in the hands of a limited group of people may find this to be useful. 

 

Private limited corporations provide the owners total authority over running the company. 

 

Professional and Trustworthy Image

 

Private Limited Company in India has a reputation for being trustworthy and professional in its dealings. It is because it does not have any shareholders and its decisions are taken by its board of directors.

 

Having a professional and trustworthy image is really crucial for any business to be successful. 

 

A private limited company gives firms a professional appearance, which is crucial when attracting new clients or investors. 

 

Additionally, it demonstrates the industry's stability and established status. 

 

It is so that private limited companies, as opposed to single proprietors or partnerships, have more credibility and legitimacy. 

 

Also, private limited companies must have a website and letterhead to boost confidence for the company in the eyes of clients and suppliers.

 

Protection from Creditors

 

An important advantage of a private limited company is that it protects from creditors. 

 

It is so because the company is a separate legal entity from its owners and shareholders. 

 

Hence, creditors cannot directly seek payment from the firm owner's personal assets in the event of debt or bankruptcy. 

 

As a result, the owners are not held personally accountable for any debts that the firm has in the event of bankruptcy. 

 

For developing startups, this can be a big advantage because it provides them with some breathing room and time to reorganize their finances without worrying about personal consequences.

 

Easy Share Transfer

 

This benefit is also the reason why investors prefer private limited companies when investing their money and time.

 

A shareholder may transfer their shares of a private limited company to anyone else. 

 

It is simple to transfer shares by completing a share transfer form, signing it, and giving the share certificate to the buyer.

 

The process can be done by an individual, company, or trust.

 

The most common way for individuals to transfer their shareholding is through the sale of their shares on the Stock Exchange. 

 

Shareholders can also transfer their shareholding through several different methods such as gift, inheritance, or exchange for other assets like property.