Why should you start a Private Limited Company?


There are multiple factors an entrepreneur should consider before picking out the type of business one plans to register. The size and nature of the business, fundraising, scale, etc. should be considered before selecting the type of business entity. The private limited company has to pay GST and TDS return and there are no exceptions to it. Here are some of the reasons why you must sign in your business as a private limited company. 


Limited Liability
One of the primary advantages of starting a private limited company is limited liability. Limited liability means limited exposure to financial risk by investors of a companionship. Limited liability means the shareholders' liability in the company is limited to the capital amount invested in the companionship.
For example, if Sam invested Rs 100,000 to take up a private limited company. The financial obligation is his investment of Rs 100,000. In another language, he can potentially lose that cannot be beyond Rs 100,000. He won’t be liable for any financial obligation beyond this initial Rs 100,000.

Business Continuity
Private companies enjoy perpetual succession. What does perpetual succession mean? Shareholders may come and go, but the firm still continues to be in existence. The company is unaffected by the death of any of its shareholders or the conveyance of its shares to another person.
For example, in a partnership firm, a modification inside the membership results in the dissolution of the present partnership while in a private limited corporation, one shareholder may additionally switch his stocks to another, but the company still keeps operating.

Fund Raising
Financial institutions such as banks, venture capital funds, individual equity funds lend their resources more willingly to private limited companies that to other forms of business organizations.
Banks are more likely to lend to limited companies because they can utilize the assets of the company as security for the loan. Venture capital firms invest in a private limited company in exchange for equity shares; this cannot be accomplished in a partnership firm.

Transfer and Exits
Limited companies are less complicated to sell compared to partnership firms. Ownership is represented by equity or preference shares and these can be easily sold without affecting the natural processes of the company.

Salaries to directors
There is no maximum limit on the salary being paid to directors; whereas in that respect is a ceiling limit on the salary paid to partners of the partnership firm as per Income Tax Act, 1961.

Read more- Top 20 CA Firms in Delhi

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