Top 5 Reasons to Incorporate a Private Limited Company
Forget about the 1,001 reasons. Allow us to name just the top five reasons to incorporate a private limited company.
Starting a business in India is what many entrepreneurs have in their drawing boards, considering its 1.35 billion people automatically qualifying as potential clients. For that reason alone, India becomes the favorite spot to go big-time.
Data released by the Ministry of Corporate Affairs is one proof of India’s economic potential. According to the MCA’s web database, 75 percent of four start-up businesses in India opt to register their investment house as a private limited company.
The same data provides that these companies have a common denominator: five reasons to incorporate a private limited partnership.
From the looks of it, both local and international investors appear to have legitimate grounds to believe India’s economic potential and for many reasons too.
A business company is required to create a legal personality for them to do business, not just in India, but even in other countries as well. It is a must for a company to have a legal personality autonomous and independent of its members of the board of directors.
Part of its attributes stipulated under its certificate of incorporation is the ability and flexibility to formulate its own corporate policies, which include perpetual succession and an eternity of business.
Most, if not all businesses, have their share of ups and downs. Under this extreme condition, board directors could not be made to bear the brunt of whatever mess the company gets into. And even if they do, they could only be liable for just whatever share they have in the company.
Same principle applies to members who could only be compelled to hand over no more than their official value of the shares.
Interestingly, a company can exercise its power to acquire and to dispose of properties, to contract, to file charges, and, believe it or not — to face charges.
Business Life Continuity
The corporate structure, which embarks on a hierarchy, occasionally undergoes a shake-up of sorts. A corporate revamp, however, doesn’t affect the company as it remains the same entity, enjoying the same privileges, immunities, estate, and other assets.
Neither death nor insolvency of a board member is enough to alter its corporate entity. Life goes on for the company, to say the least.
A private limited company will continue to operate for who knows how long or until after bankruptcy, should this moment arrive.
Share of stocks is basically the lifeblood of a company. Equally essential in a company are the interests of the directors, members, and shareholders.
Regardless of who holds the share, anybody who has a stake in the company, whatever they have under their name is deemed transferable as provided for in the company’s articles of incorporation.
Under this setup, many are lured to invest funds in the form of shares of stocks, which could be converted into cash at any time a shareholder would want to. This corporate policy provides liquidity as shares are open to sale or transfer through the stock exchange.
This equates company stability which translates to a higher price of its stocks.
Shares of stocks are considered the company’s lifeblood, it is important to take note that shareholders do not have control over the company properties. The company property would remain as such.
Not even a major stockholder could possibly own it. They could even be made liable, administratively and criminally, in the event that one misappropriated corporate funds or used company property for personal purposes.
Taking You There
These five reasons to incorporate, however, have its hidden twists – unless properly guided by the right business advisors in the field of incorporation.
To incorporate a private limited company is certainly attractive, sheer knowledge on its advantages is not as easy as A-B-C. Consider incorporation specialists in India. We at the 3E Accounting can guide you through every step of the way towards incorporating a private limited company.
For help, please contact us. We’ll be glad to help you form the type of business you wanted in India because that’s what we are.