What are Advantages of Registering a Private Limited Company in India?

Posted on: 2017-01-12 02:47:08

Primarily, a business entity is created to either sell a product or service. Under commercial laws, these entities are formed and there are many types of it. In all of these, in India, the private limited company business entity is widely popular. Business persons have accrued huge wealth due to these companies. Apparently, this gives a reason why its acceptance is much higher as compared to the others like Limited Liability Partnership (LLP), Cooperatives, and Corporations and so on.

What is a private limited company (or “Pvt. Ltd.” as we hear daily)?

By definition, it is a small business entity held privately, restricting the number of shareholders to 50, limiting the business owners only to their shares, and not allowing the shares to the general public. The phrase “Private Limited” means limited liability only for the owners, unlike the public limited companies where the shares can be sold or traded with the general public.

Why registration of a private limited is important?

For an entrepreneur, it is always tough to decide on the type of business entity they want to start with. To that, the experts suggest them starting a private limited company. However, there have been several skeptics too who offer their volley of questions, raising doubts and suspicions over this. Regardless of what they say, private limited company registration in India is highly beneficial in more than one way. It is important because it helps in attracting funding, limits business assets to be only at risk and not the personal assets and opens up multiple opportunities.

What are the advantages of a Pvt. Ltd. Registration?

Quite a flurry of questions downpour regarding the advantages of a private limited company. Here, we’re doing a bit to showcase only “some” of them:

  • Tax advantages – Though the company has to pay a corporate tax on its taxable profits yet they are exempted from the higher tax rates of personal incomes. That is definitely a big advantage of private limited company, which does not happen in the case of a sole trader or proprietor.
  • Resources and finances – Having the adequate funds, the private limited companies can produce goods, which costs much lower. Consequently, it helps in reaping profits and allows business growth through retaining funds.

Similarly, there are many more like these that the private limited companies have been enjoying after registration.

How to register the private limited company?

The procedure to register a private limited company is a lengthy one. It includes obtaining the Director Identification Number (DIN) from the MCA or Ministry of Corporate Affairs, Search and apply for the company name availability, application of incorporation, document verification and finally, the certificate is issued.

The documents needed for registration include:

  • Permanent Account Number or PAN card of all directors/promoters/shareholders.
  • Address proof of all shareholders/promoters/directors, which could be a voter ID, Aadhar Card, or Driving License.
  • Identity proof of all shareholders