Private limited companies are viewed as corporations under the law and share several common characteristics with all corporations. However, private corporations are owned and operated by a small group of people. Because of their structure, private limited corporations operate under a set of limitations not imposed on public corporations.
What is the minimum paid-up capital of a Private Limited Company? The minimum paid up capital as per the act should be Rs. 1,00,000 What is the difference between authorized capital and paid up capital? Paid up capital is the real amount of funds injected into the company for running of the business. Whereas authorized capital is the ceiling for the paid up capital
What are the advantages of a Private Limited Company?
A limited company has following advantages:
• Members' (the directors and shareholders) financial liability is limited to the amount of money they have paid for shares.
• The management structure is clearly defined, which makes it easy to appoint, retire or remove directors.
• If extra capital is needed, it can be raised by selling more shares privately. It is simple to admit more members.
• The death, bankruptcy or withdrawal of capital by one member does not affect the company's ability to trade.
• The disposal of the whole or part of the business is easily arranged. High status.
What are the disadvantages of a Limited Company?
A limited company has following disadvantages:
• Requirement to register the company with the registrar of companies and provide annual returns and audited statement of accounts. All details of the company are available for public inspection so there can be no secrecy. There are penalties for failing to make returns.
• Can be more expensive to set up.
• May need professional help to form.
• As a director, you are treated as an employee and must pay tax.
• The advantages of limited liability status are increasingly being undermined by banks, finance house, landlords and suppliers who require personal guarantees from the directors before they will do business.
What entity is best suited? The choice of entity depends on circumstance of each case. Private Limited Company has lesser number of compliances requirements. Therefore, generally where there is no requirement of raising of finances through a public issue and the ownership is intended to be closely held by limited number of persons, Private Limited Company is the best choice.
How do we comply with the legal formalities when we are not stationed in India?
You can give Power of Attorney to a person to sign the documents on your behalf. After the Company is incorporated, you can appoint Alternate Directors, to function on your behalf while you are not in India. But at least once, you should be in India within one month of the incorporation of the Company. There can be one meeting of Board of Directors during your stay in India and all other formalities including those of appointment of Alternate Directors can be complied with.
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