A Private Limited Company is a small business maintained privately, and it is highly recommended for startups in India. The registration of a private limited company is governed by The Companies Act 2013. According to this act, a minimum of 2 shareholders is required to establish a private company, with a maximum limit of 200 members. In the event of financial risk, the personal assets of members or shareholders are not subject to sale, ensuring limited liability.
Limited companies provide limited liability to both proprietors and the management team. In contrast, a public limited company can sell shares to investors, a beneficial approach for raising capital. To establish a Public Limited Company, a minimum of three directors is required, and there is no cap on the maximum number of members. However, it is important to note that a public limited company is subject to more stringent regulatory requirements compared to a private limited company.
The process involves meeting certain criteria, obtaining shareholder approval, and filing necessary documents with the regulatory authorities. Legal and financial consultation is recommended during this transition.
Benefits include limited liability, risk protection, increased business authenticity, access to financial resources, liability protection, greater capital contribution, stability, potential for growth, continuity beyond directors/shareholders, legal immunity, and lower tax rates.
Yes, a sole proprietorship or partnership can be converted to a Private Limited Company by fulfilling the statutory requirements, such as having a minimum number of shareholders and directors.
