TOP 10 BENEFITS OF PRIVATE LIMITED COMPANY?
The benefits of private limited company over all other types of businesses such as proprietorships, partnership firms, Limited Liability Partnerships, One Person Companies, and public limited companies, has made it the most preferable choice among young startup owners. This article has been written with the purpose to inform and educate readers about all the benefits of private limited company, so that an informed choice can be made on their legal statuses during their information.
As the third-largest startup ecosystem globally, India has been witnessing a sharp rise in the number of newly established businesses across industries, in the past couple of years. Most of these businesses start operating at a smaller scale and cater to the demands of the local customers only. They record low turnovers and profits, thereby, discouraging investors from investing the required capital into the businesses. However, startups continuously aspire to make it big in their respective industries and garner the desired amount of capital for the growth and expansion of their businesses. Hence, It is often recommended that they get incorporated and avail of the benefits of Private Limited Company.
Top 10 Benefits of Private Limited Company
- Limited Liability Protection: Private limited companies offer limited liability protection, distinguishing them from proprietorships and partnerships. Shareholders are shielded from personal liability for the company’s debts and losses. Their liability is restricted to their capital contribution, agreed upon prior to the company’s incorporation. This feature not only attracts investors but also safeguards shareholders from financial ruin during crises, making it a standout benefit of private limited companies in India.
2. Attractiveness to Investors: Private limited companies are favored by investors due to their potential for growth and proven success in the Indian market. Renowned brands like Parle, Google, American Express, Coca-Cola, and Jaguar are private limited companies, underscoring their credibility and market acceptance. This attractiveness to investors aids startups in securing necessary capital for growth and expansion, positioning private limited companies as the optimal choice for ambitious entrepreneurs.
3. Preference by Banks and Financial Institutions: The mandatory registration process for private limited companies under the Companies Act 2013 enhances their credibility. Government databases contain authenticated information about these companies, instilling confidence in investors and creditors. Unlike unregistered businesses like proprietorships and partnerships, private limited companies enjoy enhanced credibility, a crucial factor in attracting investment and financing.
4. Perpetual Existence: Private limited companies enjoy perpetual existence, independent of changes in ownership or management. Unlike proprietorships and partnerships, where the departure of an owner or partner can lead to dissolution, private limited companies can endure indefinitely. This continuity provides stability and reassurance to stakeholders, making it a significant benefit of private limited companies.
5. Low Income Tax: Private limited companies may qualify for tax holidays under Section 80IAC of the Income Tax Act, offering relief to shareholders for three consecutive financial years. Additionally, the cost burden of legal and tax compliances is comparatively lower for private limited companies, enhancing their attractiveness as business entities.
6. Easy Incorporation Process: The online registration process facilitated by the SPICe+ application streamlines company incorporation. This seamless process reduces paperwork, time, and costs associated with registering a private limited company. The integration of various services, including DIN, PAN, TAN, and registrations under GST and EPF, simplifies the incorporation process, making it accessible to aspiring entrepreneurs.
7. Flexible Shareholder Requirements: Private limited companies require only two shareholders to commence operations, providing flexibility for smaller companies to attract investment. Moreover, the maximum limit of 200 shareholders allows for scalability and growth opportunities. This flexibility is particularly beneficial for startups with global aspirations, distinguishing private limited companies from public limited companies with more stringent requirements.
8. No Capital Requirement: Private limited companies in India are no longer required to maintain a minimum authorized capital, offering relief to startups struggling to arrange capital in the initial stages. Additionally, there is no maximum capital limit, allowing private limited companies to raise as much investment as needed without constraints.
9. Exemption from Audit Committee Mandate: Private limited companies are exempt from the mandatory requirement to appoint an audit committee, reducing compliance costs and administrative burdens. This exemption, coupled with the lower minimum director requirement, enhances the ease of doing business for private limited companies.
10. Power to Sue: As legally recognized entities, private limited companies possess the power to sue third parties in court to resolve disputes. This legal standing and admissibility of company documents provide protection of rights and interests in case of conflicts, distinguishing private limited companies from unregistered entities.
How Auriga accounting can enhance the benefits of a private limited company?
Auriga Accounting can enhance the benefits of a private limited company by offering additional services and expertise tailored to the specific needs of entrepreneurs and businesses. Here’s how Auriga Accounting can include more benefits for private limited companies:
- Comprehensive Business Advisory Services: Auriga Accounting can provide strategic guidance and advisory services to help private limited companies optimize their operations, identify growth opportunities, and mitigate risks. This may include financial planning, market analysis, and feasibility studies to support informed decision-making.
- Tax Planning and Optimization: Auriga Accounting can assist private limited companies in minimizing tax liabilities and maximizing tax benefits through effective tax planning strategies. This includes identifying eligible deductions, exemptions, and incentives to optimize the company’s tax position while ensuring compliance with tax laws and regulations.
- Financial Reporting and Compliance: Auriga Accounting can help private limited companies maintain accurate financial records, prepare timely financial statements, and comply with regulatory requirements. This includes assistance with statutory audits, filing annual returns, and fulfilling other compliance obligations under company law and tax regulations.
- Corporate Governance and Risk Management: Auriga Accounting can provide guidance on corporate governance best practices and help implement robust risk management frameworks to safeguard the interests of stakeholders. This includes establishing internal controls, conducting risk assessments, and ensuring adherence to ethical standards and regulatory guidelines.
- Access to Funding and Financing: Auriga Accounting can facilitate access to funding and financing options for private limited companies, including debt financing, equity investments, and government grants or incentives. This may involve preparing business plans, financial projections, and investor presentations to attract potential investors or lenders.
- Technology Adoption and Digital Transformation: Auriga Accounting can support private limited companies in adopting innovative technologies and digital solutions to streamline their operations, enhance productivity, and improve customer experience. This includes implementing cloud-based accounting software, automation tools, and digital payment systems to optimize business processes.
- Training and Development: Auriga Accounting can offer training and development programs to empower the management team and employees of private limited companies with the necessary skills and knowledge to drive business growth and success. This may include workshops, seminars, and online courses on various topics such as financial management, compliance, and leadership development.
