A private limited company is a type of privately held small business entity, in which owner’s liability is limited to their shares. The firm shall have a minimum of two members and may have a maximum of 50 members, and the shares of such entity are prohibited from being publicly traded. A company becomes an independent legal structure when it is incorporated.
So if you wish to start your own company, then registering your company as a Private Limited Company should be your foremost priority. It is much preferable as it is easy to incorporate and easy to dissolve as well also it allows outside funding to be raised, there is Limited liability of the shareholder and allows them to offer ESOs to pull in great talent.
A natural person can be a director and as well as shareholder, whereas a corporate legal entity can only be a shareholder. In addition to that, foreigners are also allowed to be the Directors and/or Shareholders of a Company with Foreign Direct Investment, to help it in its expansion plans.
Why should you form Private Limited Company?
1. Separate Legal Entity: A Private Limited Company is an independent legal entity and is separate from all its juristic members (Shareholders/Directors)
2. Unceasing existence: A Private Limited Company has 'perpetual succession' or uninterrupted existence until it is legally dissolved. A company is an individual entity, is not affected by the death or departure of any of its member and continues to exist irrespective of the changes in ownership.
3. Limited Liability: The partners in a Private Limited Company are not personally liable for all the debt raised. In a company, the amount invested in starting the business would be lost and the personal assets of the directors would be safe.
4. Increased Borrowing Capacity: A Private Limited Company can issue equity shares, preference shares, debentures and accept the deposits with SECP permission. The Banks and Financial Institutions prefer to provide the funding to a company rather than the partnership firms or proprietary concerns.
5. Easy To Transfer: Ownership of a business can be easily transferred to a company by transferring its shares. The signing, filing and transfer of a share transfer form and a share certificate are sufficient to transfer ownership of a company. In a private limited company, the consent of other shareholders might be required to effect share transfers.