7 Reasons to Register a Private Limited Company
One of the major decision or experience of any person's life is to register a company. To start a business, it is essential for every entrepreneur to choose the right business entity as choosing the right business entity has long-term implications throughout the business life cycle.
Registering your company will help you to give legal existence and after that, everything will take place only according to legal process.
Many people have a misconception that incorporating a Private Limited Company is a difficult process but actually it is not so. If you are following the right steps, then a company can be incorporated within 7-12 days. Earlier a Private Limited Company were used to be incorporated through five forms i.e DIR-3, INC-1,INC-22, INC-7 and DIR-12 but now such five forms get combined into one integrated form i.e INC-29.
A company can get successfully incorporated only after having a great team of employees. Employees are the company's greatest asset. The success of the business depends on upon the ability of not only one person but also depends on the ability of the great team.
Therefore, employees are an integral part of every business entity and it is essential to have a great team of employees to make your business successful.
Many Entrepreneurs have a question in their mind Why to register a Private Limited Company? So, let's discuss, what are the 7 reasons for incorporating a Private Limited Company.
- Easy to Form
Nowadays, the formation of Private Limited Company is a very easy task. To start a business, entrepreneurs should choose Private Limited Company because it is easy to form and it requires only 2 persons for complying with the requirements of the Companies Act, 2013. The fastest way to incorporate a Private Limited Company is through integrated Form INC-29.
Therefore, it is the first and foremost reason to incorporate a Private Limited Company.
- Limited Liability
One of the greatest benefits of incorporating a Private Limited Company is that the financial liability of shareholders is limited to their shares. In this, the liability of the members is limited up to the extent a number of shares remaining unpaid.
Therefore, if a Private Limited Company was in financial trouble, shareholders would not risk losing their personal assets. Moreover, if any liability arises then the member is not personally affected and they are only liable for unpaid shares held by them.
- Attract Funding
Funding is essential for starting a new business entity. A business entity without funds cannot survive for a long term. Like for eg. a musician without an instrument. Funds are required at each and every step for every business entity. Growing a business today also requires funds.
Funding can be through family, friends or by debt or equity or it can be self-funded. Nowadays, it becomes a major requirement for small business to grow and attract funding.
Therefore, incorporating a Private Limited Company is the best way to attract funding.
- Perpetual Succession
The word perpetual succession means members may come and members may go but the company goes on forever. This actually means that in a case of death of the owner or transfer of shares, business would not get affected or there will be no effect on the continuity of the business.
Therefore, Private Limited Company will continue forever irrespective of any death of owner or transferability of shares.
- Separate Legal Entity
The word entity means a thing with distinctive existence. A company is an artificial person having a legal entity. Also, the members or shareholders of the company have no liability to creditors of the company.
Hence, a Private Limited Company is a legal entity separate from that of its members.
- Greater Flexibility
A Private Limited Company is flexible in nature. Flexibility here refers to easily convertible into any other forms of business like Public Limited, Limited Liability Partnership etc.
The entrepreneur should refer to incorporate a Private Limited Company because it can be easily convertible into other for of business which can be beneficial for every business entity.
Therefore, it is preferable to register a business entity as a Private Limited Company.
- Limited Risk
The risk exists in each and every business. Therefore, it is essential to protect your business against losses or any financial difficulties. As discussed, the members of the Private Limited Company has a limited liability.
Therefore, it is important to register an entity as a Private Limited Company which provides limited liability protection to its shareholders.
Hence, registering a company as a Private Limited contains limited risk.