Private Limited Company

Private Limited companies can be formed by at least two individuals. The shares allotted to its members are also not freely transferable between them. These companies are not allowed to raise money from the public through open invitation. They are required to use “Private Limited” after their names. The examples of such companies are ABC Private Limited, XYZ Private Limited, etc.

Basic requirements for Private Limited Company Registration:

  1. A minimum 2 Shareholders are required
  2. A minimum 2 Directors are required
  3. The Directors and Shareholders generally be the same person
  4. One of the Director must definitely be a resident of India
  5. The minimum advisable Authorised Share Capital is INR 1 lakh
  6. DIN (Director Identification Number) for all directors is needed
  7. DSC (Digital Signature Certificate) for 2 promoters and 1 witness is required

Benefits of Private Limited Company

Ease of Formation
Separate Legal Entity
A company is a separate person having its own rights & obligations. 

Perpetual Succession
The company will continue to exist in the eyes of law even in the case of death, insolvency, transfer of shares or bankruptcy of any of its members.

Limited Liability
The liability of each member of the company is limited. 

Greater Flexibility
As compared to public limited company, a private limited company is required to comply with lesser legal formalities and compliances. It also enjoys special exemptions and privileges under the company law.

Secrecy
Under the Company Law, a Private Limited Company is not mandated to publish its accounts and file several documents. This way, it becomes easier for a Private Limited Company to maintain business secrets.

Investment
A Private Limited Company has the flexibility to easily raise loans and investments from NRIs and foreigners.

Easy Transferability of Shares
Shares of a company limited by shares can be transferred by a shareholder to any other person. The transfer is much easier as compared to the transfer of interest in a proprietary concern or a partnership.

Owning Property
A company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No shareholder can make any claim upon the property of the company as long as the company is a going concern. The shareholders are not the owners of the company’s property.

Capacity to sue and be sued
Just as one person can bring a legal action in his/her own name against another in that person’s name, a company being an independent legal entity can sue and also be sued in its own name.

Dual Relationship
In a Private Limited Company, it is possible for the company to make a valid and effective contract with any of its members. It is also possible for a person to be in control of the company and at the same time be in its employment. Thus, a person can at the same time be a shareholder, creditor, director and also an employee of the company.

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