Explore Some Essential Benefits Of Registering As Private Limited Company
The first question that comes to the mind of an entrepreneur while setting up their dream project is about the business entity. This is an important factor in a new company formation and is sure to have long-term implications throughout the life-cycle of the business. The company’s entity must reflect its vision and so one must ensure that professional help is sought before making a decision on the entity at the time of business registration.
What is Private Limited Company?
A private limited company, or LTD, is a type of privately held small business entity. This type of business entity limits owner liability to their shares, limits the number of shareholders to 50, and restricts shareholders from publicly trading shares.
Some might point out that a private limited company will involve a lot of administrative work and tends to incur more costs than the less complicated sole trader entity. Then why should a start-up prefer a private Ltd entity over the latter? The most predominant answer is the financial liability. A private Ltd company does not put the entrepreneur at the risk of personal bankruptcy in the event of business failure.
There are three kinds of members involved in such companies- members limited by ownership, members limited by shares (shareholders), and the members limited by guarantee (guarantors).
Read ahead to understand about some essential benefits of registering as Private Limited Company:
In the event of the company being wound-up, no member is bound to contribute anything more than the nominal value of the shares held by him which remains unpaid.
A private Ltd company creates a professional image and boosts the business value. They are viewed as more established and credible over the sole traders. Also, this entity provides a sense of security to the investors and professionals choosing to use the business’ services. It also suggests business permanence. 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.
The Company is a distinct legal or juristic person independent of its members (directors). From the date of incorporation mentioned in the certificate of incorporation, subscribers to the memorandum and all other persons will be capable of exercising all the functions of an incorporated company under the Act and having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name.
It is a known fact that corporation tax rates are lower than the income tax rates. Registration of company as private limited enables the new company 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. It also gives scope for the employees to get pension contributions from the employers. The company can make tax relaxable contribution towards employee pension fund which will be a tax deductible expense for the company.
Flexibility and Autonomy:
The Company has an autonomy and independence to form its own policies and implement them through Memorandum and Articles of Association.
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