A private limited company is one which is formed with limited liability and there is legal protection for shareholders. This type of company is held for small businesses. If we talk about the liability of the members of a private limited company, these members are limited to the number of shares. These shares cannot be traded publicly. Private limited company is a very good form of business registration and can be registered with a minimum of 2 people. There has to be a liability and protection to shareholders, equity funds should be raised and legal entities. All these act as an entity for medium and small sized businesses.
Different Tax Advantages & Business of Private Limited Company:
- Separate Legal Entity
An entity is something which has a real existence rather distinctly. Under the act, a person is said to be a legal entity and there is a juristic person. Therefore, the company or the organisation has wide legal capacity which also incur debts. The shareholders and all the directors of a private limited company hold no liability to the creditors of the private limited company. Thus it can be said a separate Legal entity.
- There has been an uninterrupted existence.
A perpetual session is present in the company which is said to be a continued or uninterrupted session until and unless it is legally dissolved. A company is a separate person which is unaffected by the death of any member and continues to exist irrespective of any membership. The perpetual session is considered to be the most important function or characteristic of a company.
- Limited liability is essential
To impose limited liability on someone means that the person is legally responsible for a limited amount of debts of a company. There has been proprietorships and partnerships, thus the debts of the company is limited. In other situation we can say that the members of the company can also be liable to the face value of shares which are taken by them. So if a private limited company is limited by its shares then the members get the liability of the amount which remains unpaid on their shares.
- Shares can be freely and easily transferred.
The shares of a company which is also limited by shares can be transferred to any other person by a shareholder. This process is very easy and is not much complicated like a transfer of interest in a business which can be taken as a partnership. To freely and easily transfer shares, a share transfer form has to be filled and signed and then has to be given to the buyer along with a share certificate which will perform the process.
- Owning of property
As we know a company is a juristic person. It can own, acquire, alienate or enjoy a property as per his own choice. None of the shareholders will be having any interest or claim on that property of the company so long the company is in concern of that property. The true owner of the property is the company itself.
- There is a capacity to sue and be sued
To sue a person means to file a case against him or to bring legal proceedings against that person in a court of law. Any person can bring a suit in his name against another. In that way, a company is considered a legal entity and independent who can sue a person and also be sued itself in its own name.
- Dual Relationship
The company can make a valid and an effective contract with any of its company members and employees. As we say dual relationship, a person can be in control of a company as well as one of its members also. Thus we can say a shareholder can also be an employee of a company as well as creditor or director of the company.
- Borrowing Capacity
Funds are borrowed by the company to enjoy best avenues. Debentures can be issued which can be both secured and unsecured. The company accepts deposits from the public for use. The company gets financial assistance from banking and financial institutions rather than any other proprietary and partnership firms.
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