Why should a start-up prefer a private Ltd entity over any other form of registration?
The most predominant answer is the financial liability.
The term “Limited Liability” means that the individual shareholders’ contribution towards the company debts is limited.
A private Ltd company does not put the entrepreneur at the risk of personal bankruptcy in the event of business failure.
This makes a Private Limited Company Registration is the default company registration choice for many new entrepreneurs.
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Registering as Pvt Ltd works like an Insurance for Business:
Let’s understand this with an example:
Suppose, if YOU are operating a business under Proprietorship OR Partnership model and if the business is suffering from losses, then Creditors/Banks/Investors/Others have right to recover their dues by disposing of YOUR personal assets/investments (Fixed Deposit/Shares/LIC etc.) or of Partner.
In simple words, creditors can recover by selling YOUR personal belongings also, like Jewellery/TV/Refrigerator etc.
Hence doing business as Proprietor is very Risky!
Now is there any way out? How can YOU do business and also safeguard YOUR personal assets and investments? The answer is
Register your Business as Private Limited Company as it offers LIMITED LIABILITY in other words Insurance. How does it work?
Let’s have another example.
Normally every individual covers himself/herself by 3 types of Insurance Policies i.e. LIC, Mediclaim and Personal Accident.
Every policy has its unique feature and in case any unfortunate event occurs, it will help, protect and cover the Policyholder and his/her family.
Similarly, Many business houses cover themselves with Fire/Theft Insurance. As they mitigate the risk of theft/fire etc.
Now, this type of Insurance Cover helps them only when the particular event occurs.
However What if the business goes into Losses in case of normal business circumstances? Are they eligible to shield behind these types of Insurance Covers??? The answer is NO.
Hence a Private Limited registration works like Assets Protection Cover and is the Answer to help the Business Person mitigate the risk by ensuring that none of their Personal Assets are used by the Creditors if the company is in Losses.
Register Company with HG Corporates Now! Call: 82608-82609
Benefits of a Private Ltd Company Registration
1. Limited Liability
- This is a big advantage of a private Ltd company. Having a limited liability enables shareholders and members not to take the complete burden of debts in case the business encounters with huge financial losses. The assets and finances of the shareholders remain safe.
- In extreme cases of a financial bankruptcy of the company, the shareholders need to only contribute the nominal value of their shares. Having this security allows the company to provide high-value services which might otherwise lead to liability claims.
2. Boosts the Business Value
- A Private Ltd company creates a professional image and boosts the business value.
- A Private Ltd company opens up business opportunities with larger companies which will otherwise not be available.
- Registering a company as a private Ltd ensures brand uniqueness and also eliminates duplication in the market.
3. Attract Funding
- A Private Limited Company Registration is recommended for any business that is considering FDI or Employee Stock Options or Equity funding or Venture Capital funding.
- For any startup, funding is a very crucial aspect of establishing, maintaining and growing a business. For a business to grow quickly, it needs to have all types of funding which can be made available.
- Thus, a private limited company is the ideal type of business entity for growing businesses.
4. Tax Saving
- Registration of a company as private limited enables you to save a significant amount on the taxes.
- Apart from the usual salary, the company can also choose to pay dividends to its shareholders.
- The dividends have lesser tax deductions when compared to the salary and hence is of higher benefit to the shareholders.
5. Attract Better Talent Pool
- Great businesses are a product of great teams.
- Success in business is now determined by having the ability to quickly build great teams.
- In today’s competitive market, it is essential for a company to retain its high-performing talent pool. To do so, businesses are offering a number of benefits like stock ownership or ESOPs.
- This is only possible in case of a private Ltd company.
6. Improves Business Credibility
- Registering a Private Limited Company is far quicker than registering an LLP or any other form of Company Registration.
- Registering as Pvt. Ltd. Company Improves Business Credibility. Private Limited Companies offer Reliability or Trustworthiness to businesses in financial institutions, suppliers, and potential clients.
- Seemingly this is why a startup should ideally truly consider registering as Private Limited Company over any other form of company registration.
7. Management & Ownership
- A Private Limited Company offers more flexibility when it comes to transferring or sharing of ownership.
- The ownership of a Private Limited Company is determined by its shareholding and a Private Limited Company can have upto 200 shareholders.
- Further, since the shareholders do not directly participate in the management of the company, there is a clear distinction in a Private Limited Company between the owners of share and the management.
- Hence, a Private Limited Company is advantageous when it comes to ownership and management features.
Private Limited Company Registration is Preferred Because:
The concept of PRIVATE LIMITED in INDIA since 1956. They are more famous in a country like India and hence are preferred more.
Private limited companies have been in existence for longer and enjoy widespread recognition in India and the world.
Many people argue that Private Limited Company Registration has too much compliance, taxation, and paperwork, it’s a headache for them!
Agreed to some extent but don’t forget, all this demonstrates is that you’re serious about doing business & hence investors, vendors, clients/customers prefer Pvt. Ltd.
Your Business will require a professional to help you with Balance Sheet and Tax Filings, and the amount involved is hardly anything compared to you putting your Personal Assets at Risk.
As far as compliance, paperwork is concerned, it can be outsourced by hiring professionals Like HG Corporate Advisors.
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- HG Corporate Advisors offers Company Registration and Compliance related services to startups @ low cost to help them grow.
- While Directors of the start-up concentrate on their business growth;
- We at HG Corp. takes care of their business compliance services like accounting, filing of forms/returns to statutory authorities as may be applicable from time to time.
We can help you with your Startup Registration as Pvt. Ltd. Company and manage its compliance requirements. So that, entrepreneurs can focus on their clients/customers without worrying about compliance requirements.
Don’t let misconceptions come in your way when you’re thinking of registering your company as Private Limited Company
Common myths about Private Limited Company Registration in India
The tendency to avoid choosing to register a Private Limited Company as a form of business, especially amongst start-ups, is due to certain notions and myths surround the private limited company.
MYTH#1: Private Limited Company is expensive
A few years ago, incorporation of a Private Limited Company used to be expensive with the incorporation charges reaching the limit of Rs. 50,000 or more. This used to make one think that incorporating a Private Limited Company would burn a hole in your pocket.
We register your company as Private Limited in just `13,700/-. in less than 10 working days.
MYTH#2: Shareholders Meetings Are Required More Often
As per Companies Act, 2013, it is mandatory for a Private Limited Company to hold an Annual General Meeting. However, Board meetings are necessary only when special resolutions need to be passed.
Meetings related to the maintenance of legal compliance of a Private Limited Company is a matter of minutes and is not a tedious or hefty task to perform.
Hence, whether it is Annual General Meeting or Board Meetings, it should not come in the way of choosing to register a Private Limited Company as a form of doing business.
“When all is said and done, the main factors that every entrepreneur should have a long, hard look at it; the readiness to bear legal fees, who the promoters are, who will contribute the capital, what the funding requirement will be and the restrictions on growth (as often times an LLP cannot be converted to a private or public limited company). Depending on these answers, the entrepreneur will know which type of registration the entity will undertake.”
The fact that there is no dearth of help available online, there are also many online legal service providers that can do all of this work for an entrepreneur at a minimal cost.
If you’re based anywhere near or in Mumbai, Looking For Company Registration in Mumbai, Visit Our Office.
You’ll surely be satisfied with the timely & affordable services we offer with the absolute peace of mind.
So for entrepreneurs looking to start their own ventures, due and diligent research on the kind of incorporation, as well as the way they will go about in procuring this legal paperwork is as important as the very concept of the startup itself!
To Register Your Company as Pvt Ltd. in Mumbai:
Call on 82608-82609
Email us: email@example.com