Advantages of Private Limited Company

As per definition is given in  Companies Act, 2013 “private company” means a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed.There should be at least two persons to form a private company. A private company can, therefore, be registered with a minimum of 2 members and cannot have more than 200 members (excluding employee and ex-employee members). It cannot invite the public to subscribe for its shares or debentures nor can its shares be freely transferred.a private limited company must add The word Private Limited to the end of its name. The private limited company is a successful business model in India. The business owners hold all shares of the company privately and may operate the business themselves or hire directors to manage the company on their behalf. In today’s article, we will list some of the major Advantages of Private Limited Company.

Private Limited Company Characteristics

The major features/characteristics of such companies are as follows.

  • It can be formed by two members but the number of member limit shall not exceed 50.
  • There are restrictions on filling the prospectus of the statement in lieu of prospectus with the register.
  • It can begin business after registration without requiring any certificate.
  • Statuary meeting is not required as well as not to submit statuary report.
  • The number of directors at least should be two in numbers. However, the maximum numbers of directors are mentioned in the Articles of Association.
  • Without any prior approval of the government, directors of a company can easily receive a loan.
  • It is necessary that there should be at least two members in a meeting to make a quorum.
  • The payments are made to the directors and the management staff are required no restrictions.
  • The financial report i.e. balance sheet and profit and loss did not require to send the copies to account to the registrar.
  • The word (Private) limited is compulsory to use as the last word of the name.
  • It cannot be listed on the stock exchange of the country.

Advantages of Private Limited Company

Some advantages of Private Limited company Are as follows:

Separate identity: A private limited company is considered to be a separate legal entity. It has its own identity and very much the law recognizes this as a separate company. Also, the company can own property due to this feature under its name.

Limited Liability: Benefits of Private Limited Company lies in the fact that it has a limited financial liability of all the shareholders, as the liabilities are limited to their shares only. This protects the personal assets and income of shareholders at times of any financial crisis and Also, it gives the company more liberty of taking risks.

Long and continuity of Existence: Continuity of Private Limited companies are not affected when the owner is not able to continue due to any unforeseen reason. A Private limited company is a separate legal person, is not affected by the death or departure of any member.

Minimum requirement of shareholders and members: Only two members and two shareholders are required to incorporate a private limited company. This gives many Entrepreneurs an opportunity to set up their own company.

Ease of Raising Funds: Banks easily sanction loans to private limited companies, Therefore, we can say the scope of expansion is greater when a private limited company is incorporated. The Banking and Financial Organizations are more likely to assist a Private Limited Company rather than other forms of business.Funds can be borrowed to a great extent by issuing the debentures. More likely, Company raises funds by shareholders as well.

Tax Advantages: Private Limited Companies have major tax advantages added on to the limited liability, As the companies pay corporation tax on their taxable profit and tend to get exceptions from higher personal income tax rates.

Flexible Relations: A person can be at the same time be a shareholder, creditor, director and also an employee of the company. A Private limited company is considered flexible regarding the members of the company and They are considered reliable too.

Recommend : How to Change Registered office of Private Limited Company


After reading this article I am sure you might have gained some insights into Advantages of Private Limited Company. If you still need help in incorporating a private limited company or want any help regarding the legal matter that may concern this type of company then you can seek the help of our experts at MYONLINECA.