Why Private Limited Company Adopted by Startups ?
- Better Governed: Companies are governed by The Companies Act, 2013 and have to follow various other regulatory procedures during the course of its governance, moreover they have to comply with the stringent disclosure norms so imposed by the authority, which let to better governed organizations and creation of value for owners.
- Private Investments: Generally, when any business idea clicks, it needs funds to grow,private company is the best option for this to raise the funds from the Investors.
- Borrowing Capacity: In compare to other forms, more preference is given to private limited company in giving loan from Banks.Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.
- Separate Legal Identity: A private limited company is a legal entity and a juristic person established under the Act.Therefore a company form of organization has wide legal capacity and can own property and also incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts.
- Selling the Business: It is easy to sell business for a company than any other business form. As business Corporation value will be based on the business, not the owner, therefore making it easy to sell the Company.
- Limited Liability: Members personal assets are safe. Liability of company is limited to the assets of the same.
Unlike proprietorships and partnerships, in a limited liability company the liability of the members in respect of the company’s debts is limited.
- Share Transferability: By following compliances in private limited company a shareholder can easily transfers its shares.
- Perpetual Succession: An incorporated company has perpetual succession. Perpetual Succession means the company shall continue to exist even if the member dies or ceases, etc. Changes within the management does not bring any affect onto the identity of the company, the Company will remain the same with same privileges, immunities, estates and possessions. The Company shall continue to exist till its wound up in accordance with the provisions of the relevant law.
- Separate Property: A Company as a legal entity is capable of owning its funds and other properties. The Company is the real person in whose hands all the property is vested and such company has the sole right to control, manage and dispose off the property so vested in the hands of the company. The property of Company is not the property of its shareholders.
- Capacity to sue: As a juristic legal person, a Company can sue in its name and be sued by others.
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