Private Limited company
A Private Limited Company is defined under Section 2 (68) of the Companies Act 2013. It is the type of company where the shares of the company are privately held by its shareholders and the company is not listed in the stock exchange. Since the shares of a Private limited company are not freely transferable and only limited to the interests of its shareholders the company can enjoy many privileges and exceptions granted by the law. In India, a Private Limited Company is one of the most common types of legal entity. These Companies are governed by the Companies Act, 2013 & require a minimum of 2 Directors & 2 Shareholders with one of the Directors being an Indian Resident and Indian Citizen. 100% FDI is permitted in most sectors in India & there is no restriction on foreign shareholding of a Private Limited Company. Hence, most Foreign Subsidiaries are established in India as Private Limited Company.
Benefits of Private Limited Company Registration in India
Limited Liability: The responsibility of the members of a private limited company is restricted to their share only as the private limited company is a separate legal entity.
Separate Legal Entity: A private limited company is a separate legal entity that possesses all the rights to sue or to be sued. It acts as an artificial person who can buy a property in its own name.
Credit Availability: A private limited company can obtain funds from the debentures as well as the stockholders. Registered Private Limited Company is considered a corporate entity that attracts different angel investors and venture capitalists that helps them to expand and raise their funds for the growth of their business and company.
Perform Internationally: The private limited companies support Foreign Direct Investment, in which another type of firm requires appropriate licensing and approval from the administration for foreign investments.
Pre-requisites for Private Limited Company Registration in India
The basic requirements to start the Private Limited Company in India includes requirements of directors and shareholder along with the documents. It is vital to collect all the requirements prior to the starting the Private Limited Company.
Minimum 2 Shareholders.
Minimum 2 Directors & maximum 15 Directors.
At least one Directors must be an India Resident.
The Shareholders & Directors can be same person.
DIN or Director Identification Number for all Directors.
DSC or Digital Signature Certificate.
PERKS & BENEFITS OF REGISTERING A PVT. LTD.
Limited liability protection to directors personal assets
Many times startups need to borrow money and take things on credit. In case of normal Partnerships, Partners personal savings and property would be at risk incase business is not able to repay its loans. In a private limited company, only investment in business is lost, personal assets of the directors are safe.
Better image and credibility in the market
Private limited company is popular and well known business structure. Corporate Customers, Vendors and Govt. Agencies prefer to deal with Private Limited Company instead of proprietorship or normal partnerships.
Easy to raise funds and loans
Pvt. Ltd. company enjoys wide options to raise funds through bank loans, Angel Investors, Venture Capitalists, in comparison to LLPs and OPCs.
Favorite business structure for investors
Investors love to invest in Private Limited companies as it is well structured and less strings attached. Most important it is very easy to exit from a private limited company.
Easy to attract employees
For startups putting together a team and keeping them for long time is a challenge, due to confidence attached to private limited structure, it is easy to hire people as well motivate them with corporate designations and stock options.
Easy to sell
Private Ltd. is easy to sell, very less documentation and cost is involved in selling a Pvt. Ltd. company.