- Post:CA Sundram Gupta
- June 15, 2020
6 Advantages of Registering Private Limited Company
A Private Company registration is governed by MCA and regulated by the Companies Act 2013. Just like every other form of company, Private limited company registration is necessary for the smooth functioning of the company. It is necessary to use the word PVT LTD. The following are the advantages of company registration of any Private limited Company:
- Limited Liability: The greatest benefit of private limited company registration is that it is treated as a single entity in which the company is responsible for all the debt payments. The company is liable for any shortcomings, its members are not personally affected, they are only responsible for unpaid shares.
- Tax Savings: By registering a Private Limited Company, there are many ways in which you can have extra monetary benefits by saving tax. There are some tax planning tips that every Private Limited Company considers to fill its pockets a little high. Salary to the director is an allowable expense for the Private Limited Company. All preliminary expenses like drafting od MOA and AOA, stamp duty printing of documents, etc are also allowed as expenses. Private Limited Companies are taxed at a rate of 22% with a surcharge of 10% and cess of 4% making the effective tax rate as 25.17%
- Employee Stock Option Plans: Private Limited Company can issue ESOP to its employees subject to the limitation of the number of shareholders. Section 61 of the Companies Act enables a Private Limited Company to issue ESOP to its employees
- Easy Transferable: One of the benefits of Private Limited Company registration is the share can be easily transferred to the other person without any complications and hassle-free.
- Get Easy funding: A Private Limited company enjoys a better option for borrowing funds. It can issue debentures secured as well as unsecured. Banks and other financial institutions also prefer giving financial assistance to large private firms.
- Separate Legal Entity: A Private Limited company has a separate existence different from its directors and shareholders. In case of any liability, the company is liable to pay its debts not the directors or shareholders.
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