Private Limited Company
Setting up a private limited company is one of the highly recommended ways to start a business in India. A Private Limited Company (PLC) is one of the most common types of legal entityin India. Private Limited Companies are governed by the Companies Act, 2013 and require a minimum of 2 Directors and 2 Shareholders with one of the Directors being an Indian Resident and Indian Citizen. 100% Foreign Direct Ownership (FDI) is permitted in most sectors in India and there is no restriction on foreign shareholding of a private limited company. Hence, Pvt Ltd. Company help in Fundraising from India and foreign investors.
Advantages of Private Limited Company
1. Separate Legal Entity – A company is both a legal entity and a juristic person. Therefore, a company has broad legal rights like acquiring property, incurring debts, hiring people, etc. As a company is a separate legal entity, the company’s members (shareholders or directors) are not personally liable for the company’s liability.
2. Uninterrupted existence – A company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. A company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership.
3. Limited Liability – A private limited company is a separate legal entity with limited liability provisions. Therefore, the shareholders are not liable for the losses of the company – for an amount more than what was invested by them into the company as share capital.
4. Borrowing Capacity – A company enjoys better avenues for borrowing funds. It can issue debentures, secured as well as unsecured, and can also accept deposits from the public, etc. Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.
5. Fund Raising – A private limited company has multiple options for fundraising. A company can raise funds from shareholders, investors, angels, venture capital funds, private equity funds, foreign funds, NBFCs, banks and other financial institutions. Only a company can raise debt and equity funds from investors.
Disadvantages of Private Limited Company
1. Limited numbers of members – Most common disadvantage is its members are limited in few numbers. As the upper limit is restricted, it creates some disadvantages for the company. Because when the company needs another or more experienced and skillful Owners, it has no option to expand the business.
2. Difficulties in the expansion – It is not so easy to transfer or expand the business of private limited company due to limited numbers of members, small or shortage of capital, provision of not to transfer or sale of shares etc. However, the economic growth may also be lined because maximum shareholders allowed are only 50.
3. Small capital – Private limited company is not any large scale business so usually the amount of capital is not huge which often stands as a major problem for the persons concerned. Very often the company cannot utilize its future possibilities only because of the lack of proper financing.
4. Compliances – A company has to mandatorily maintain various compliances irrespective of business turnover or activity. Hence, operating a company involves a minimum recurring cost each year.
Documents Required from Directors, Shareholders
- Pan Card Copy (Mandatory)
- ID Proof (Any one) – Driving License/ Voter ID/ Passport Copy/ Aadhaar Card
- Address Proof – Latest Bank Statement/ Latest Telephone or Mobile Bill/ Latest Electricity Bill.(MUST be less than 30 days old)
- Passport Size Photograph
- Bank Statement
Documents Required for Registered Office Address
- NOC – No Objection Certificate from the Owner of the Property
- Address Proof – Latest Telephone Bill or Mobile Bill/ Gas Bill/ Electricity Bill (MUST be less than 30 days old)