Benefits of Incorporating Private Limited CompanySaloni Sheth / 2020-01-29 03:57:33
There are a few advantages of a Private Limited Company.
Let’s discuss those:
Separate Legal Entity
The company becomes a separate legal entity as well as a juristic person which indeed is not a natural or a real person but at the same time has a real and distinct existence. This type of company has a broad legal capacity that can own assets and incur its debt. All the directors and shareholders of the company have no part in the company’s liability for any kind of debts.
Unlike partnerships or proprietorship, a private company has a benefit known as limited liability. This benefit gives the members a debt limit. This means if a company is being winded up due to debt and liabilities, then the members are only required to pay the value of shares taken by them. No personal asset shall be involved while paying debt
The company cannot be discontinued or interrupted until it is dissolved legally. This is also called perpetual succession. Since the company is also a separate legal entity, it will be unaffected by any death or any deceased member. It will continue to be in existence no matter what the situation or circumstance arrives. This might be one of the most important benefits of a Private Limited Company Registration.
Since the company is a juristic person, it can own all the company assets on its name. The shareholders cannot own any assets and hence they cannot claim any property as long as the company is nit being dissolved in debt. If the company is in a good stage, shareholders have no right on the Company’s property.
A private company can borrow funds from various sources naming secured and unsecured debentures, financial institutions, banks, public, etc. It is also said that financial institutions and banks prefer to provide funds to these companies instead of Partnerships or proprietorship firms.
In these kinds of companies, it is possible for the same member to maintain different relationships with the company. In other words, we can say that the same person can be a shareholder, employee, creditor and a director of the company all at the same time. This is called a dual relationship.
Capacity to sue and be sued
Just like a normal person can be sued or can sue any other legal person/entity, a private company being a separate independent legal entity can sue and get sued in its own name too. Sue is to carry legal proceedings in a court of law for doing something against the law.