Private limited company is a proven, successful business model. The Shareholders may operate the business themselves, or hire directors to manage the company on their behalf. Forming a private limited company results in protection of personal assets, access to more resources, financial assistance and greater tax benefits.
The benefit of private limited companies is limited liability. Private limited companies are treated as a single entity, making the company responsible for all debts. If anything happens to the company, its members are not personally affected; members are only liable for unpaid shares. “Officers of the company retain their company salaries, they cannot be made bankrupt and they are free to form a new company. Fraud is the only instance of unprotected liability. If creditors lose money through director fraud, the directors’ personal liability is without limit.
Advantages of Private Limited Company
- Minimum number of directors and shareholders are Two.
- Limited Liability:In case the company experience financial inability to repay debts or its liability exceeds assets, the liability of the shareholders to contribute to the company is only up to the capital paid up or accepted to be paid.
- Permanent succession:The Company remains in existence irrespective of the status of Directors or shareholders.
Disadvantages of Private Limited Company
- The private company can’t go to public for mobilising fund and the number of members restricted to 200 only.
- There are restrictions in transferring the shares of the private limited company.