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Pankaj Tyagi
| Updated: 17 Dec, 2020 | Category: Company Registration

Exciting Benefits of Private Company Registration That You Can’t Ignore!

Benefits of Private Company

India is a destination that holds immense potential for development and prosperity for business entities. Apart from this year, where the growth has been hindered due to COVID 19 outbreak, everything seems to be on par for the Indian economy. As the dust of the current disaster is settling down, the new entrepreneurs have become more eager than ever to jump into the business fraternity.

However, there is a great level of uncertainty among entrepreneurs about different business models. There are instances when an individual ran into trouble during the selection process due to a lack of inadequate information. In this write-up, we would unveil some typical benefits of private company registration.

Which Business Structure Offers More Value?

The right business structure can pave down the path of success and help you accomplish your goal with a minimum of hassle. But the point is which business model you should opt for? If we go with the current scenario, we would suggest you opt for the legal structure viz private limited company.

To start with, we would like to clear one thing to you that there is no such thing as the “perfect business structure”. In a nutshell, every business form has to deal with some disparities irrespective of their growth prospect and potential to survive in tough times. So, don’t expect that a specific business model will let you bypass legal or tax obligation entirely.

Apparent Benefits of Private Company Registration

The section below will elaborate the standout benefits of private company registration that one can avail as soon as after the registration.

Benefits of Private Company Registration

No Minimum Capital

The private limited company is required no minimum capital for its formation. A privately-held entity can be registered with an amount of Rs 10,000 as total authorized share capital. This sum is significantly lower than that of a public limited company. This is one of viable benefits of private company registration.

Perpetual Succession 

The private limited company works on the principle of “Perpetual succession”. Meaning, its existence would remain unharmed until its members decided to winding up through the legal process. The uninterrupted continuation makes it a most reliable and sustainable business model, unlike its counterparts. Simply put, a private limited company will continue to serve its founders until they decided to close it down via legal procedure. It means the business would remain harmless irrespective of the status of its members. Even during the unfortunate event such as the demise of the owner or liquidation of assets, a Pvt. Ltd. Company continues to operate seamlessly.

Limited Liability

The structure of the Privately-held entity facilitates comprehensive protection to its owners and member during the financial crunch. Unlike other business models, the private limited company has the potency to safeguard the assets of its member and owner during a stressful situation.

This business model allows the member to bypass any risk associated with addressing debts, raised due to losses that occurred to the company. Unlike other business models, the private limited company is more growth-centric and attracts a minimum of compliances and risks. This is one of the standout benefits of private company registration.

Seamless Transferability or Selling Of Shares 

There is no obligation on the private limited company to procure a pool of shareholders for the registration purpose. As per the ongoing law, such companies only require a minimum of two shareholders[1] to become eligible for the registration process. The maximum number can go up to 200 as the business thrives with time.

The founders and the shareholders of the privately held entity reserve the right to sell or transfer their shares to anyone and anytime. That’s mean that the shares held by these individuals is not subjected to any condition related to selling or transferability. 

Considerable Scope of Expansion

Every company needs an ample amount of capital to stretches its existing footprint. The private companies offer the liberty of adding a maximum of 200 shareholders which inherently strengthens the ability of its founder to procure additional funds for expansion. In the initial stages, the private company owners are more reluctant to share their detail of business with others even if their success depends on them.

However, as the business thrives, the need for more capital will escalates with time which in turn drives the owner to get more shareholders on board through a legal process. When it comes to scaling the business, a private limited company offers unparallel opportunities in that regard. Henceforth, it is one of prominent benefits of private company registration.

Long-Term Benefits 

Private limited companies are best at providing long-term benefits to their owners, shareholders, and members due to their legally balanced structure. It lures fewer risks as compared to its counterparts and offers improved rigidity for a prolonged time. Since it is hard to dissolve easily, the private limited company strikes the perfect balance between the benefits and probable risks. 

Ease of Fund Raising

A Private Limited Company is of a kind business structure that can procure capital from Angel investors or venture capitalists. 

Attract Overseas Investment 

In a Private Limited Company, the FDI is allowed to the extent of 100%. This means that the outsiders can directly invest in these entities with mere legal complications. 

Builds Credibility

The details of the privately-held entity are available on a public database. This helps in improving the credibility of the entity as it makes it easy to authenticate the particulars. 

Conclusion

The business structure of the private limited company advocates growth and ensure long-term benefits for its members and shareholders. When contrasted with other business models, it is far more reliable both in terms of risk and legal obligations. And most importantly, it keeps its founder asset safe against unexpected financial turbulence. Also, the compliances in such a business model barely torment its founders due to simplified legal procedures. Hence, we can conclude by saying that a privately-held organization is much more stable and rigid than any other business model on account of legal intricacies and growth prospects. Don’t hesitate to share your concern regarding benefits of private company registration with CorpBiz experts.

Read our article:What is Cost of Company Registration in India?

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Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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