This is the most popular form of legal entity in India, from start-ups to large businesses for various reasons. A Private Limited Company is a separate legal entity both in terms of taxation as well as the liability which limits the personal liability of the shareholders, separation between ownership and operations, external fundraising and smooth exit of investors which makes this the most preferred format. A private limited company must have a minimum of 2 to 50 shareholders. Minimum two Directors must be appointed to look after the daily affairs of the company.
Benefits of a Private Limited Company
The first advantage of a Limited Company is the same being considered a separate legal entity and safeguarding the promoters from debts/liabilities of the company. This ensures the shareholders/directors are not personally affected in case of any eventuality.
Access to Finance
Equity funding is feasible in this particular structure alone. Banks and financial institutions prefer lending to a Limited Company. Further, it has the option of issuing debentures or accepting deposits.
The private limited company enjoys continuous existence as the company is its own legal entity. In the event of a death or resignation of a shareholder the company’s Articles of Association enables allocating the shares to remaining members. Discontinuation of the company only occurs through liquidation.
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