Overview
Documents
Benefits & Drawbacks of a Private Limited Company:
Merits | Description |
Limited liability | A Private Limited Company safeguards the personal assets of its shareholders, ensuring that they remain untouched in the face of financial troubles or legal disputes. |
Separate legal entity | This corporate structure exists independently from its owners, enabling it to enter contracts, own assets, and engage in legal proceedings under its name. |
Perpetual succession | Regardless of changes in shareholders or directors, a Private Limited Company can continue its operations seamlessly. |
Ability to raise capital | It can raise capital by issuing shares to the public or through private placements, facilitating expansion and growth. |
Tax benefits | Private Limited Companies in India enjoy tax advantages and deductions under various provisions of the Income Tax Act. |
Demerits | Description |
Compliance requirements | Private Limited Companies must adhere to a multitude of regulations, including the Companies Act of 2013, maintain accurate financial records, and file annual returns. |
Restriction on transfer of shares | Shares in a Private Limited Company cannot be freely traded on a stock exchange, limiting shareholders’ ability to sell their shares. |
Higher cost of formation | Compared to other business entities, forming a Private Limited Company requires more capital and involves higher initial expenses. |
Management and control issues | Disagreements among shareholders or directors can lead to management and control problems within the company. |
Lack of privacy | Private Limited Companies must publicly disclose financial information and other details, potentially compromising their privacy. |