Private Limited Company
A business entity is called a private limited company when its ownership is private i.e. shares privately held instead of public. Such type of company offers limited liability and legal protection for its shareholders but also imposes certain restrictions on the ownership.
The following are the restrictions imposed by the company over its ownership:
1. The shareholders are not allowed to sell or transfer their shares without offering the same to the other shareholders for purchase.
2. The shareholders are also not allowed to offer their shares to the public over a stock exchange
3. Only a limited number of shareholders are allowed.
The following are the advantages of owning a private limited company:
- Uninterrupted Existence: The company does not get affected by the death or departure of any member as it is a separate legal entity.
- Limited Liability: The members are legally responsible only to a limited amount of debts of a company unlike proprietorships and partnerships.
- Free & Easy transferability of shares: A shareholder of the company can easily transfer the shares to any other person without any legalcomplexities.
- Dual Relationship: A member or employer of the company can be a shareholder, creditor, and director and also employee of the company at the same time.