Private limited companies are prevalent in India. Amongst all of the forms of companies, private limited is very popular. Almost all of the entrepreneurs prefer using the PVT LTD as the company extension. In India, the Private companies are governed under the Companies Act, 2013. With a lot of benefits for the same, it’s the most popular type of company.
There are hundreds of benefits of choosing private limited companies. Even though the incorporation phase is tedious, people prefer the same. Learning more about the advantages of a private limited company will help you choose the same for your business. Here are a few benefits that are making entrepreneurs love private companies.
Benefits of Private Company Private Limited Companies
The private limited company incorporated under the laws of Companies Act, 2013. The act was introduced back in 1935 but was amended recently in 2013. It mentions a few benefits from private companies. Here are the advantages of private limited companies.
#1 – Perpetual Succession
Perpetual Succession means the company never dies. Unlike the partnership or the sole proprietorship, where the death of the owner or partner ceases the existence of the firm. But in private companies, the death of the founders or partners does not affect the existence. The company never dies.
Death or departure of the partner never causes the cessation of the company. The shares of the partner are transferred to the legal heir, and the company operations go on. The company only ceases to exist when it’s wound up according to the law.
#2 – Legal Entity
According to the laws, the entity is the person or institution which exists. The private company is the legal entity, which means it exists according to the law. The partnership firm and the sole proprietorships are not legal entities. As the company is now a legal entity, it can enjoy the benefits of the law and also liable for following the law. With the legal entity, the company can be identified separately. It will have a unique name and unique identity in the eyes of the law.
#3 – Artificial Person
The private limited company is an artificial person in the eyes of the law. As it has a separate legal entity, it can behave like an average person. A company will have a unique name, different address, and also a signature. Just like any other person, it can buy the assets, land, machinery, apply for loans, and many other things. According to the Companies Act 2013, a private limited company is an invisible and intangible person. The only thing a company cannot do is to vote in the general elections. Otherwise, it reaps the fruits of being an artificial person.
#4 – Limited Liability
All of the businessmen prefer private limited companies because they have limited liability. Unlike the sole proprietorship and partnership, the private company does not have full liability on the shoulder of the partners or the directors. The liability of the company is nothing more than the share contribution of the directors. The personal assets of the directors are not used to pay off the company liabilities. So, the liability of all of the shareholders is limited to their capital contributions. This is the most significant factor that makes people opt for private limited companies for starting the new business.
#5 – Borrowing Capacity
The company has an excellent borrowing capacity. It can raise funds through loans, debentures, secured debentures, shareholders’ contributions, and even the secured deposits from the public. The company has many ways to borrow money. Although the borrowing capacity depends on the various factors. But the overall capacity is still greater than the other forms of business. The startups mostly register the private company so that they can raise the capital for their business.
A private company is one of the most popular types of business forms. The LLP, Public companies and partnership firms, etc. are useful, but not much popular amongst the entrepreneurs. With the recent 2013 amendment in the Companies Act, private companies have got a lot of operational benefits. So, it’s becoming the smart way of starting and running the business in the Indian economy. In short, these are the few benefits of starting the private limited company in India. If you are looking for Private Limited Company Registration Service in Mumbai then you must contact Us.