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Start-ups and growing businesses prefer private limited company as it allows outside funding to be raised easily, limits the liabilities of its shareholders and enables them to offer employee stock options to pull in top talent.
Private Limited Company
A Private Limited Company is preferred by a lot of startups as it builds the trust in the mind of stakeholders i.e. Investors, Lenders, Government etc. A Pvt Ltd. Company has 'Perpetual Succession', which means it will not be affected by death/insolvency/walk out of its members or shareholders. To incorporate a Private limited company, minimum of 2 members are required. It may have maximum 200 members. Also, there is no minimum required to incorporate a company, so if you do not have lots of funds, even then you can go for it. Private Limited Company offers its members, limited liability towards creditors. i.e. In a case of default, banks / creditors can only sell company’s assets but not personal assets of members.
Start-ups and growing businesses prefer private limited company as it allows outside funding to be raised easily, limits the liabilities of its shareholders and enables them to offer employee stock options to pull in top talent.
Advantages of Pvt. Ltd. Company
1.
Implied Trust
It being most organised legal structure, it attracts the trust of customers and other stakeholders in itself. Agencies and other vendors prefer to deal with Pvt. Ltd. Company.
5.
Borrowing Capacity
Pvt. Ltd. Companies have the option of raising funds from the market. Funds can be raised through equity or preference share or through debentures. Also, funds can be procured through bank loans.
2.
Easy To Raise Funds
A Private Limited Company has many options to raise funds from. Banks, Angel Investors, Venture Capitalists etc. prefer Pvt Ltd. Company over LLPs and OPCs to invest in.
6.
Owning Property
Being a separate identity from its shareholders, a company can enter into an agreement in its name and can own land or any other property or make investments in its name separate from the shareholders.
3.
ESOPs
A Private Limited Company has the option of issuing Stock options to its employees. This helps in getting the employee connected with the organisation for a longer period.
7.
Perpetual Succession
A company has perpetual succession which means that the identity of company will not be lost by just death or insolvency or walk out of its shareholders. It will continue to exist irrespective of changes in members.
4.
Easy Transferability
Transfer of ownership is easy for a Pvt. Ltd. Company. It can easily be done by just signing, filing and transfer of share transfer form and share certificates and you are all set.
8.
Separate Entity
In the eye of law, a company is a distinct artificial person, i.e. the shareholders and company will be separate from each other and the shareholders will not be held responsible for the conducts of the company.
