If you are a growth-oriented entrepreneur, you need to have a business entity to prime you for success. That’s where private limited company registration comes into play. As you’d be making a vital business decision choosing the infrastructure for your business venture, choosing this business entity should be the first very first decision you make.
But why form a private limited company? We don’t have one, two, but nine reasons establishing this business entity bodes well for your business dreams.
What is Private Limited Company Registration?
Before we look at all the bounties you get to enjoy once you establish a Pvt ltd company, let’s look at private limited company registration. It’s the process to incorporate your Company as per the Companies Act under the Ministry of Corporate Affairs.
The Companies act define this type of business entity that has:
- Restricted transference of shares among only its members, and
- Can have a maximum of 200 members.
Extrapolating these features, you can understand the benefits that emerge from this particular business entity.
Reasons to establish a private limited company in India
Once you set up a Private limited company, you gain the following benefits:
You get a separate legal entity.
With a private limited registration, you get access to a business entity that’s separate from its directors and members. It means that no matter what happens to the members or directors – whether it’s death or retirement until someone shuts down a company, it will continue to exist.
Furthermore, the existence of this business entity doesn’t intertwine with its promoters. It means that a company can act as a person and own property and incur debts. Furthermore, the separate legal entity aspect of a Pvt ltd company allows it to sue or get sued in its name.
The first reason to establish a limited company is to set up a separate entity whose name you can use to own property and take legal actions.
The Perk of Limited Liability
You can save a lot of tax in a limited company because the corporate tax is lower than the income tax. Furthermore, the members also enjoy government provisions on the dividends they earn.
Due to attracting less tax deduction than payment of salary, the employees can also get benefits in the form of pension contribution in a private limited company.
Furthermore, even the pension contribution comes with tax benefits, increasing tax savings for a company.
Through Private Limited Company Registration, you can earn tax benefits from three perks:
- Lower corporate taxes,
- Payment of dividends to its shareholders, and
- The facilitation of pension to its employees.
You can earn more growth opportunities.
Being separate from the identity of your Company, you have business freedom. Thus, and diversify your career to pursue other goals. Furthermore, registering a private limited company allows you to pool resources with your co-directors – increasing your potential for growth at many levels.
It is one option that non registered business entities like the partnership firm or a sole proprietorship are sorely missing.
With Pvt Ltd company registration, you are independent of your business entity. It gives you a chance to put diverse efforts into your Company – allowing it to grow even further.
It becomes easy for you to raise money.
With a private limited company, you have a separate legal entity. Having the control of a separate legal entity makes you appear more appealing to the investors. As a result, you can earn angel investments by only putting in a creative effort.
Furthermore, a private limited company runs as per the strict laws of the Ministry of Corporate Affairs. Therefore, your creditworthiness improves in the eyes of your customers and banks.
Consequently, you will be able to charm your way into banks to gain loans and attract customers to your products.
Starting a private limited company makes you appear more trustworthy in the eyes of banks, investors and customers. You can raise money after only putting in a little creative effort.
Also Read: RNI Registration
You can transfer the ownership of your Company.
All the shares and other interests of your private limited Company members are movable property. Thus, you can conduct share transfers efficiently by just modifying the Articles of Association.
It provides a sense of flexibility to the members who can either choose to stay with your business or leave it at any time. While many don’t see it as a benefit, it gives you an option to search for worthy members if someone ultimately leaves your Company.
The flexible infrastructure of a private limited company allows it to transfer shares between members quickly. Furthermore, it will enable members who aren’t confident to leave the business entity while also allowing new members to be added easily.
You can enhance your credibility.
Being registered with the Ministry of Corporate Affairs, a Private Limited company must go through regular compliance to stay operational. The information MCA collects through these compliances about a company can be publicly accessed by its database. It promotes transparency and thus, enhances its credibility.
A limited company allows you to establish yourself as a credible business entity. The regular compliance you submit to the regulatory authority will enable you to appear more transparent and thus reliable in the eyes of investors.
You can get a chance to take your business global
As a private limited company, you get permission from the government to gain foreign investment without any prior approval. As a result, you can enhance your stature among your peers.
Now that foreign companies can directly invest in a private limited company, you can access unprecedented business growth. You can go beyond your national boundaries and elevate your business identity globally.
Foreign Direct Investment without any approval gives a limited company to shine globally.
You gain access to a talented staff
As a registered business entity, a private limited company has more goodwill. It thus has access to more trust from people. Consequently, it can attract talented employees who are looking to elevate their status along with yours.
Furthermore, a limited company can give employees an option of ESOP. By turning employees into indispensable shareholders, you get to evolve your business backed by a workforce willing to stick with you through thick and thin.
The legal stature of a company allows it to attract talented employees, and the ability to issue these employees shares allows it a retain them.
You can easily register a private limited company
Perhaps the biggest perk of a private limited company is how easy it is to establish it. As we now live in a computer-aided era, Pvt ltd company incorporation is automated. With only a little input from the company secretaries or chartered accounts, you can think of a business idea one day and transform it into a company within a week.
You can easily incorporate a Private Limited Company through a semi-automatic process with only minor involvement of business experts.
Also Read: One Person Company Registration
There are many reasons for you to start a private limited company. We have merely listed nine of them here. Are there any more? Of course. But to know them, you must venture into this corporate unknown. Establish your own private limited Company with the aid of our experts and decide what kind of perks you can derive from it.