Outfit Clothing Suite

Private Limited Company Setup Services in India

A journey towards establishing a private limited company is an exciting venture, filled with opportunities and challenges. Private limited company setup services are designed to facilitate this journey, providing a comprehensive solution to the complexities of company formation.

As per Section 2 (68) of the Companies Act, 2013, a private company is a unique business entity, distinguished by specific characteristics:

A. It limits the right to transfer its shares.

B. The number of shareholders is capped at 200, excluding certain individuals such as those employed by the company.

C. It does not allow public subscription for any securities of the company.

A private limited company is a separate legal entity from its promoter, offering a layer of protection to its shareholders. The financial liability of shareholders is limited to the value of their shares, safeguarding their personal assets from any financial turbulence the company might face.

Private limited company setup services provide end-to-end assistance, from choosing a unique company name to ensuring compliance with the Companies Act 2013. They also aid in the preparation and submission of necessary documents, making the process more efficient.

Interestingly, private limited companies are a popular choice among Indian businesses. A staggering 93% of all business incorporations in the country are private limited companies. This preference is attributed to their ease of formation and dissolution, and relatively lower compliance requirements compared to public limited or listed companies.

In conclusion, private limited company setup services are a valuable resource for entrepreneurs aspiring to establish a private limited company. They simplify the process, ensure legal compliance, and enable business owners to focus on their core competencies – running their business.

Advantages and Disadvantages of Private Limited Company

Advantages

➲ Lesser Income Tax

A Private Limited Company enjoys a reduced tax bracket of 15% in Manufacturing business and only 22% for other businesses. Earlier the rate of income tax used to be 30% plust applicable cess but the Government of India has reduced the rates of Income Tax applicable on Companies in accordance with the Ease of Doing Business in India initiative.

➲ Distinct Identity

An entity means something that has a true existence; an object with a distinct existence. A company is a legal entity and a legal entity established under the Law. Hence a company is a form of the organization having broad legal potential and that may own property and also incur debts in its own name. The members of the company have no liability towards company debts because the company and members both are separate people in the eye of the law, hence company is an artificial person having a separate legal identity.

➲ Liability is Limited

Limited Liability means the status of being legally responsible for a company’s debts only to a limited sum. Like proprietorships and partnerships, the Member’s responsibility for the company’s debts is limited in a limited liability company. In other words, the responsibility of a company’s members is limited only to the sum of the face value of the shares they take over.

➲ Acquiring property

A company may buy, possess, enjoy and alienate property under its own name, becoming a legal individual. No shareholder can claim the company’s property as long as the company is a company. The shareholders are not the actual owners of the company. The company itself is the real proprietor.

➲ Capacity to sue and be sued in its own name

To sue means initiating legal action against or putting a suit before a court of law. Just like one person in the name of another person can bring legal action against another in his / her own name, a company being an independent legal entity can sue and be sued in his / her own name too.

➲ Perpetual Succession

The private limited company, being a separate legal entity in the eyes of law, is known by its name. Thus, director/member cessation/death does not affect the Private Limited Company’s existence. Members may come and members will leave but the company goes forever.

➲ Easy Funding

A private limited company can raise funds from its member after issuing shares to them or issuing debt securities to them. And the private limited company has the opportunity to convert itself into public limited after which it can raise money from the general public at large after listing its shares in the stock exchange and taking IPO in the market.

➲ Business credibility

If a business is established as a proprietorship or partnership, it is not registered with the Ministry of Corporate Affairs and can not be found in the databases of the online company or LLP. Often there is no reliable evidence of the existence of the company, making it difficult to open a bank account, acquire trustworthy clients, or receive credit from vendors.

➲ Easy entry & Exit

A private limited company is an easy way to get into the corporate market, only you need to get register your form of the company under the ministry of corporate affairs and obtain the certificate of incorporation and it has an easy existed option too if you want to shut down your business you only need to inform to ministry through required form and you take exist legally after settling your liability.

➲ No Minimum Capital Required

As per the point of view of incorporation, there is no minimum capital required for incorporating a private limited company. As per company law 2013 you can start a private limited company with 0 paid-up capital.


Disadvantages:

➲ Prohibition on the invitation of the public for investment

A private limited company can not invite the public at large for making the investment in the company, apart from its member no person is allowed to make the investment in the company. It is prohibited from company law 2013.

➲ Transferability of shares

In a private limited company person, a shareholder cannot transfer its share to the general public (non-member) unless it is approved by the board of the company. Under the private limited company, the share firstly transfers to its member if they refuse to accept then only it can be transferred to the third person, this restriction is imposed by law.

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