A Private Limited Company is a privately held small business entity. The liability of members of a private limited company is limited to the number of shares held by that member. A private limited company is governed by the Companies Act,2013. The minimum number of shareholders required to start a private limited company is two while the upper limit of members is 200 in accordance with the Companies Act,2013.
If a private limited company faces financial risk, its shareholders are not liable to sell their individual assets i.e. they have limited liability. There must be a minimum of two directors and a maximum of 15 directors for a private limited company and a director must be 18 years above in age. A foreign national can become a director of private limited company India.
It is compulsory to add private limited (Pvt Ltd) to the name of a private limited company India. Minimum paid up capital amount for a private limited company is Rs. 1 Lakh. A private limited company keeps on existing even in the case of death or bankruptcy of its Members.
Many times startups need to borrow money and take things on credit. In the case of normal Partnerships, Partners personal savings and property would be at risk in case business is not able to repay its loans.
Investors love to invest in Private Limited companies as it is well structured and less strings attached. Most important it is very easy to exit from a private limited company.
Private limited company is popular and well known business structure. Corporate Customers, Vendors and Govt. Agencies prefer to deal with Private Limited Company instead of proprietorship or normal partnerships.
For startups putting together a team and keeping them for a long time is a challenge, due to confidence attached to a private limited structure, it is easy to hire people as well as motivate them with corporate designations and stock options.
Pvt. Ltd. company enjoys wide options to raise funds through bank loans, Angel Investors, Venture Capitalists, in comparison to LLPs and OPCs.
Private Ltd. is easy to sell, very less documentation and cost is involved in selling a Pvt. Ltd. company.
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