Private Limited Company is just like a part of the financial structure of the society which is to be called the surplus units and contributes to the financial system in order to grow the whole society. In order to start a business, it is important to provide a choice of the business entity. In order to owe a private limited company registration, it is advantageous due to its characteristics of limited financial liability of shareholders is limited to their shares.
1. Maintain Financial Stability: Accumulating fund is a pious requirement for starting, growing and maintaining a business. There can be numerous source of gathering it. Hence it becomes necessary to maintain the financial stability of the business, as it is recommended to be an ideal type of business entity for growing business by attracting equity shares easily.
2. Limit the risk to Personal Assets: Profit and loss is an integral part of every business. Hence, it is one of the major reasons to opt for a Private Limited Company registration. It is very important for any entity to protect itself against losses, in order to cover the financial difficulties. Since, as per the feature of limited liability, it is admissible that only the assets of the business are at risk and not the personal assets.
3. Improves Business Creditability: Business credibility becomes high as soon as you start with a Private Limited Company. Every required information about the company is available and searchable in the public database. Hence, one can easily authenticate the existence of the business, which improves business credibility.
4. Defines a separate individual authorized entity: A Private Limited Company will always provide a sense of security to his employees by defining an individual authorized entity by the owner. Especially, this acts as a facility for the start-ups since it is beneficial for them to start with limited finance and time.
5. Hassle free and easy process to get your company registered: It is indeed a very easy process to get registered with a Private Limited Company. It is less expensive in terms of legal and compliance costs. On the contrary, in order to set up a Public Limited Company, it involves higher capital and costs. Hence, incorporation and management of a company are important in India under the Companies Act of 1956.
But now, it has been changed under the introduction of New Companies Act 2013. The companies are required to be incorporated, under which MCA (Ministry of Corporate Affairs) has come up with a new set of forms in order to manage the SPICe (Simplified Proforma for Incorporating Company) with a new set of forms. MCA has taken an initiative in easing of incorporation of the companies, in order to achieve the objective of improving the ranking in World Bank Report.