Overview
India has always been the epitome of trade centers across the world. This makes India a land of opportunities for new entrepreneurs and business enthusiasts. However, to start a business in India, you need to make several crucial decisions.
One such decision involves choosing the right business structure for your company. Among all available options, new pvt. Ltd. company registration is a very popular choice. Through this article, let’s explore the various benefits of registering a Private Limited Company in India.
Limited Liability
One of the most significant benefits of starting a private limited company in India is its limited liability protection. This includes the shareholders’ assets which are separate from the company assets. Hence, it acts as a security blanket for shareholders and promoters of the company. Moreover, since their assets are secure from financial liabilities, it encourages them to take well-calculated risks which may lead to the growth of a business. This feature of limited liability protection also helps in encouraging investments and acts as a factor of attraction for investors.
Credibility and Trust
As a business structure, private limited companies instil more credibility and trustworthiness. This includes all other business structures like LLPs, Proprietorship firms, and more. Having the suffix “Pvt. Ltd.” attached to your company name helps in enhancing your brand reputation. It makes it easy to build trust with the clients, vendors, investors and partners. The credibility you gain with this business structure can lead to a lot of business opportunities to help you scale to new heights.
Separate Legal Entity
When a private limited company is registered, it gains a separate legal existence. Hence, the company is an artificial legal entity under the eyes of the law. As a result, the company can own assets, enter contracts and sue and be sued in its name. This gives the company a certain level of independence and flexibility. This feature is not most common in many business structures.
Perpetual Existence
A private limited company is entitled to a perpetual existence due to its separate legal entity feature. As per the characteristic of perpetual existence, you can continue business operations even if there is a change in the directors or shareholders of the company. Moreover, this continuity is very crucial for the long-term growth and stability of a business.
Easy Transfer of Ownership
The ownership distribution in a private limited company is based on the number of shares held by particular shareholders. Besides, there are no restrictions on the transfer of shares of a private company as per the Law. It is governed as per the charter documents of each company. Hence, the transfer of ownership is a very simple process. All you need to do is transfer the shares from one person to another. This helps in making it easy for the shareholder to exit from the business or to bring in new investors to grow. This free transferability is available to make the transfer of ownership easy, without disrupting the day-to-day business operations.
Access to Funding
In India, all private limited companies can raise capital by issuing shares to new investors. This makes it a very attractive option for various businesses that want to expand. This helps in the expansion of a business and allows investments in new projects. Additionally, it is easier for private companies to seek loans and check out other credit options from various financial institutions.
Tax Benefits
To encourage business in India, private companies are subject to a favourable tax structure. Hence, the rate of corporate tax for private limited companies is less than that of the other types of business structures. Moreover, they can reduce their tax payable by opting for various deductions and exemptions. Besides, if you are a newly established startup, with DPIIT recognition, you can apply for tax exemption for three consecutive years.
Employee Benefit
One more added benefit of having a private limited company is the employee advantages it gives. Private Companies can provide attractive incentives to their employees. This includes ESOP and various other benefits such as EPF and ESIC. These benefits usually help in attracting and retaining top talent.
Limited Compliance
Each year, there are certain mandatory obligations that a private limited company must fulfil. However, as compared to the other business structures, the compliance requirements are limited. It reduces the administrative tasks and burdens on the owners of a Pvt Ltd company. Moreover, it helps in focusing on growing the business.
Access to Government Schemes and Incentives
In India, the government offers varied incentives and schemes that promote business growth. This includes private limited companies. Moreover, Private companies usually qualify for various benefits from the government, such as tax incentives, subsidies, grants, etc. These help them save on operational costs and invest in expansion.
Conclusion
When you choose to register a private limited company in India, there are numerous benefits to it. However, before you register, you must understand what is pvt ltd company and why it is popular. The countless benefits are a primary attraction. However, it’s essential to consult with legal and financial professionals to understand the specific requirements and obligations associated with this business structure before proceeding with the registration process.