Best 5 Advantage of Private limited company registration

advantage of private limited company registration

You have landed up here because you have decided to start your new business and exploring advantages of private limited company registration.

Private limited company is balanced form of new business registration which have intent to stay in business for long term.

Cost of registration has become cheaper day by day and also the process of registration had much faster and simple, credits to Ministry of Corporate Affairs.

5 Advantages of private limited company registration

1.Limited Liability

In an easy to understand terms, we can say as your risk is limited to the amount you invested in shares of the company and pending amount to be paid for shares already taken up. The concept of limited liability is very important and life saving incase of certain type of business where the risk high

Example :

XYZ CHITS PRIVATE LIMITED is chit company engaged in business of chits, on the day prior to bulk settlement to chit fund holders an mount of Rs.10 crores was withdrawn in cash and kept under custody of Mr. Fraud manager who is designated as cashier and person responsible for safeguarding physical cash, unexpectedly the manager had looted the money and escaped.

The directors of the company does not have any knowledge or involvement in theft. In this case even though the directors are responsible and if they prove that they have taken all necessary steps to safeguard the cash and acted genuinely in interest of chit fund holders, their personal assets cannot be attached, only the amount they owe to the company can be demanded from the directors.

2. Enhanced Credibility

Credibility is on of the main factor and fuel to business growth in long run, business growth is dependent on  the relation ship between the stake holders of the business viz suppliers of goods, customers, government for tax collection etc. Private limited company is regulated by Companies Act 2013 and lays down numerous rules and regulations for accounting, mode of transactions. limit of transactions, and other disclosures, so it enables transparency in transactions and reliability of financial statement with enhanced reliability.

Example :

One of the mandatory rule for private limited company is compulsory audit of books of accounts by chartered accountant, this ensures the business transactions are genuine and there is no misuse of position of director for financial personal advantage.

Easy to get investment

In the modernized and liberal business environment peoples come to invest directly in others business, this had opened up gate for new entrepreneur who have good business idea and roadmap for implementation, to get funding from venture capitalists and others. In case where the is a proposal for investment by venture capitalist the existing directors can only issue shares to venture capitalist and avoid him/her from taking part in business activities.

Unlimited Life

In technical terms, we call it as perpetual succession, it means the company will continue to exist irrespective of members (shareholders) going out or comes in. There is a rule that, the private limited company should have minimum of 2 directors as statutory limit, Out of two directors if one director resigns for personal reason then the vacancy of that director shall be filled within time allowed.

Borrowing capacity

Private limited company enjoy good borrowing capacity because of robust compliance and monitoring by Ministry of Corporate Affairs. As we had already discussed in this blog about credibility of private limited company, lenders prefer structured and regulated business compared to un regulated business so the advantage of enhanced funding ,reduced interest rate, flexible repayment terms are available to business registered as private limited company.

Final decision

Even though private limited company requires more compliance the advantage is more for prospering business. Proprietorship business or partnership  business cannot match the benefits that private limited company provide. You can have a detained discussion with your company registration consultant for good and expert understanding.

Incase you have any further doubts and need advise on new business registration we are happy to assist for company registration in Chennai. Just go for private limited company registration with good company registration consultant if you feel that your business can benefit from it.

So in layman understanding, if you need any of these features go for private limited company registration. You may have understood some basic points to register a private limited company, else if you had come here after considering proprietorship firm registration just read this guide for proprietorship firm registration


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