Top 8 Benefits of a Private Limited Company in India

Private limited companies (Pvt. ltd companies) are the best way to do business if you want to make profits and have limited liability. Apart from the benefits of limited liability and minimal compliance with statutory requirements, Pvt. ltd businesses offer the following:

Separate legal entity

An entity is a thing that has a distinct existence. A company is both a legal entity as well as a juristic person created under the Act. A juristic person can be defined as a person who is not an individual or a human being. A company is a legal entity that can possess property and incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts. A Pvt Ltd is therefore a separate legal entity from its members.

Live a life uninterrupted

Perpetual succession is the continued existence of a company until it is legally dissolution. Because a company is a separate legal entity, it is not affected by the death of any member. However, the company continues to exist regardless of changes in its membership. One of the most important features of a company is its ability to perpetuate succession.

Limited Liability

Limited liability is when a person is only legally responsible for a small number of debts owed to a company. Limited liability companies are different from partnerships and proprietorships in that the liability of members for the company's debts can be limited. The members' liability for company debts is therefore limited to the value of their shares. If a company is restricted by shares, members are only liable for the unpaid shares.

Also, check out Private Limited Company Registration in India.

Transferable shares are free and easy

A shareholder can transfer shares of a company that is limited by shares. Transferring shares of a company limited by shares is easier than transferring an interest in a partnership or proprietary concern. It is easy to transfer shares by signing and filing a transfer form.

Proprietary ownership

A company, being a juristic entity, can acquire, possess, enjoy, and alienate property in its name. As long as the company continues to be a going concern, no shareholder can claim any property. The company's property is not owned by shareholders. The true owner is the company.

Capacity to sue, be sued

Suing means to file legal proceedings against someone or bring a lawsuit in court. A person can bring a lawsuit against another person in their own name. However, a company can sue in its own name and can also sue.

Dual Relationship

A company can make valid and binding contracts with its members through the company structure. A person can also be a director or shareholder of a company while being employed by it. A person can be both a shareholder, creditor or director of a company, as well as an employee.

Borrowing Capacity

Companies have better options for borrowing money. It can issue both secured and unsecured debentures. They can also accept deposits from public sources. Banks and financial institutions will often provide large financial assistance to companies rather than to partnership firms or proprietary concerns.