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Benefits and Compliance of Setting up a Pvt. Ltd. Co.
Benefits and Compliance of Setting up a Pvt. Ltd. Co.

A private limited company is a popular choice to carry out any business. The members, can carry out the business, make profits and also enjoy the benefits of an incorporated entity. Liabilities are limited, and compliances, e.g. Annual RoC filing for private limited companies can be met easily. Here are some of the advantages:

1-Legal Entity

An entity is something which has a real existence. A private limited company is a legal entity and a juristic person that has been established under the Act. A juristic person is someone who isn’t a natural person or a human being.

As an organization, a company form has extensive legal capacity. It can own property and can incur the debts too. The members, whether the shareholders or directors of a company don’t have any liability towards the creditors of the company for the debts. Thus a private limited company is separate from its members.

2-Can Exist Without Interruptions

A company has ‘perpetual succession’. It means until the company is legally dissolved, it will continue to exist. As a separate legal person, it does not get affected by the death of any member.  Even if a person leaves, the company continues to be in existence. This perpetual succession is one of the essential characteristics of the company.

3-Liability is Limited

It means that a company is legally responsible only to a limited amount for debts. As compared to the proprietorship or limited liability company, the liability of the members towards the obligations of the company is limited. The liability of any member is limited only to the extent of the face value of the shares taken up by them.

4-Shares Can Be Transferred Easily

Any shareholder of the company can transfer its share to any other person. The transfer is smooth when you compare it to running a proprietary concern or a partnership. It can be done with a signed share transfer form along with share certificates to the buyer.

5-Can Own Property

A company is a juristic person. So, it can own property in its name. No shareholder can stake its claim on the property owned by the company as long as the company is a going concern. The shareholders are not the owner of the property of the company. The company is an owner in itself.

6-Can Sue or Be Sued

To sue means to start the legal proceedings against or to bring a suit in the court of law. The way one person can take legal action in his or her name, against others, the company is a legal entity that can sue or be sued in its name.

7-Can Maintain Dual Relationship

A company can maintain a contract with any of its member. So a member can be in control of the company and at the same time, be its employee. So a person can be shareholder, creditor, director and also its employee.

8-Better Borrowing Capacity

It is easy for a company to borrow funds. The company can issue debentures (secured or unsecured) can also accept the deposits from the public. Banks prefer to lend to companies than partnerships or proprietorships.

Compliances

But a company has to comply with laid procedures. Annual RoC filing for private limited companies are:

  • They are required to file annual accounts and returns and provide details of directors and shareholders to Registrar of Companies.
  • Every company has to conduct Annual General Meeting within        6-months of the end of the financial year and file an annual return with the MCA be at the end of each fiscal year.

Finally,

A private limited company can be set up easily and is a legal entity on its own. Raising funds and meeting compliance is not complicated and that what makes it a popular choice to carry out business activities.

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