Getting the legal status of your business can be a fulfilling experience. It will open up more avenues for your business to grow. As an entrepreneur you have to go through the Private Limited Company Registration, which is quite a complex and elaborate procedure. After you have done the process your business will be considered a legal entity that has a separate set of business operations.
To start the process you must know the standard definition of a private limited company operating in India. Let’s find your answer here;
What is a Private Limited Company?
A private limited company is a completely different but common business structure with a limited number of shareholders. Shareholders of the company have limited responsibilities for the business. Shareholders cannot get liable for the debt and obligations of the company. The company is considered a separate entity that has a legal status. This also means the company can sue or get sued, make contracts, and buy property in its name.
Any sole proprietorship business can become a company after going through the registration process. The business can include more people as its owners by distributing shares. The risks and liabilities will get shared among the shareholders in return for profit. But, registering it as a limited company will restrict shareholders to only taking some limited risks.
Now, you must know the basic advantages of registering the company. This section will provide you the information related to the advantages that you will get after the competition of the process.
Pros of Starting a Private Limited Company
A private limited company has a complete set of advantages such as;
Limited Liability Protection
One of the most significant benefits of a Private Limited Company is its limited liability protection. The shareholders’ personal assets are protected, and they are not liable for the company’s debts beyond their investment. This feature makes it an ideal choice for those who want to protect their personal assets and limit their liability exposure.
Tax Benefits
Private Limited Companies are eligible for various tax benefits, such as lower corporate tax rates, dividend distribution tax, and tax exemptions for small businesses. This feature makes it a tax-efficient structure for startups and small businesses. Presently, the government of India (GOI) has reduced the tax rate to 25% for private limited companies operating in India.
Separate Legal Identity
A Private Limited Company has a separate legal identity, meaning it can enter into contracts, sue or be sued, and own property separately from its shareholders. This feature offers more flexibility and increases the company’s credibility and legitimacy in the eyes of customers, suppliers, and investors.
Continuous Succession
This company has perpetual succession, meaning its existence is not affected by the death or resignation of the shareholders or directors. The company will continue to operate without any interruption, which offers more stability and continuity to the business. The board of directors will get replaced if any changes are made in the business structure.
Funding Opportunities
Private Limited Companies can raise funds by issuing shares to public or private investors. This feature provides more opportunities for funding and growth, making it an ideal choice for those who want to expand their business.
After discussing the key advantages, now it’s time to explore the drawbacks of registering the business. These are just some areas that can be erased easily without any hurdles.
Cons of Starting a Private Limited Company
Some of the mild drawbacks of transforming the business into a company are getting described here;
Complex Legal Processes
The registration process for a Private Limited Company is more complex and time-consuming than other business structures. It requires several legal and regulatory compliance which can be challenging for those who do not have prior experience in business law. But, there is always an option for you to get your company registered easily. Hiring an agency for completing the procedure is the best solution for you.
Stricter Compliance Requirements
Private Limited Companies are subject to stricter compliance requirements, such as maintaining books of accounts, conducting annual general meetings, and filing annual returns. These requirements can be burdensome and require more your time and resources. You can hire some managers to delegate these separate functions. They will help the director for dealing with these things.
Difficulty in Selling Shares
Private Limited Companies are restricted from transferring their shares to outsiders; therefore these companies cannot sell their shares to the public directly unless they meet specific legal requirements. The company’s ability to raise money may be restricted by this feature, and it may be challenging to leave the industry. In order to simplify the process, the GOI since has removed some cumbersome share-exchanging regulations.
Steps for Private Limited Company Registration
You have to go through this step-by-step process to register your company.
- Your company must have a unique name and a logo. After the name, you have to add Pvt. Ltd as a suffix.
- Obtaining Digital Signature Certificate (DSC) for verification of the director digitally.
- Obtaining Director Identification Number (DIN) from the Ministry of Corporate Affairs.
- MOA (Memorandum of Association) and AOA (Article of Association) must get drafted carefully.
- Obtaining PAN and TAN in the company’s name from the Income Tax Office.
- Opening the Corporate Bank Account and depositing the capital.
Finally, after going through all the details for formation your pvt ltd company as per the Indian laws, you can conclude that registering the company will help your business to expand more. This will bring success to your business operation and create more streams for growth. The steps for registration will guide you here and reduce the time for completing the process. Besides that, you must prepare a coherent business plan that will guide you to do business after getting legal status. All the information will guide you throughout to ease the registration process.
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