Private Limited Company
Start-ups and growing companies pick this popular business structure because it allows outside funding to be raised easily, limits the liabilities of its shareholders and enables them to offer employee stock options to attract top talent. As these entities must hold board meetings and file annual returns with the Ministry of Corporate Affairs (MCA), they tend to be viewed with more credibility than an LLP or General Partnership.
Features of Private Limited Company
For Businesses Raising Funding
Fast-growing businesses that will require funding from venture capitalists (VCs) need to register as private limited companies. This is because only private limited companies can make them shareholders and offer them a seat on the board of directors. LLPs would require investors to be partners and OPCs cannot accommodate additional shareholders. If raising funding is important, this is your best shot!
Limited Liability
Businesses often need to borrow money. In structures such as General Partnership, partners are personally liable for all the debt raised. If it cannot be repaid by the business, the partners would have to sell their personal possessions to do so. In a private limited company, only the amount invested in starting the business would be lost; the directors’ personal property would be safe.
Start-up Cost
Start-up Cost A private limited company costs around Rs. 8000 to start at the very least, excluding professional fees. However, this will be higher in some states; in Kerala, Punjab and Madhya Pradesh, in particular, the fees are much higher. You also need some paid-up capital, which can be as little as Rs. 5000 to begin with. No minimum share capital required and the Government has waived off the Government fee for incorporation of companies.
Requires Greater Compliance
In exchange for the convenience of easily accommodating funding, the private limited company set-up needs to meet the demands of the Ministry of Corporate Affairs (MCA). These range from a statutory audit, annual filings with the Registrar of Companies (RoC), annual submission of IT returns, as well as quarterly board meetings, the filing of minutes of these meetings, and more. If your business isn’t yet geared to meet these requirements, you may want to wait a while before you jump into registering a private limited company. The annual compliance costs are around Rs. 13,000.
There are different kinds of business forms and businesses and services in India. Irrespective of type of business organization, each one of them requires some Government registrations. For example: GST registration, VAT registration, If you are in the Import-Export business then you must opt for IEC registrations and the likes.
Few Tax Advantages
The private limited company is assumed to have many tax advantages, but this is not actually the case. There are some industry-specific advantages, but taxes are to be paid at a flat rate of 30% on profits, the Dividend Distribution Tax (DDT) applies, as does Minimum Alternate Tax (MAT). If you’re looking for the structure with the lowest tax burden, the LLP does offer some better benefits. Surcharges above income of 1cr also apply and HEC also applies
