According to the Companies Act, 2013, a private limited company is a company whose article of association restricts the transferability of shares and prevents the public from subscribing to them. This is a distinct feature that differentiates private limited companies from other types of public companies. With the rapid business growth across the country, there is a demand to learn more about the distinct business entities in India and their legal terms and conditions. In this article, we discuss what is a private limited company, explore the various types of private limited companies and learn how to start one.

Section 2 (68) of The Companies Act, 2013 defines a private limited company as a separate entity that is held privately and provides limited liability. It does not freely transfer its shares to the public like other public companies. In a private limited company, all business profits and liabilities belong to the company itself and stakeholders may not be responsible for debts incurred by the company.

ADONE is the market leader in company registration services in India, offering a variety of company registration like private limited company registration, one person company registration, Nidhi Company Registration, Section 8 Company Registration , Producer Company Registration and Indian Subsidiary registration. The average time taken to complete a proprietorship registration is 3 - 5 working days, subject to government processing time and client document submission. Get a free consultation for proprietorship registration and business setup in India by scheduling an appointment with an ADONE Advisor.


OPPORTUNITY FOR ACQUIRING FOREIGN INVESTMENT: Foreign investors trust private limited companies more because of strict compliances, data availability on the site and the fact that they follow the ROC norms. In addition, a foreign entrepreneur can become a director of a private limited company, provided there is at least one director living in India. This makes foreign investors keener to invest in private limited companies rather than any other type of business entity.

SEPERATE LEGAL ENTITY: Private limited companies are separate and independent and changes or replacements in shareholders or directors do not affect them. Any private limited company is established under a legal constitution. It means even if all members of the company leave or the company goes bankrupt, it still exists according to the law.

CAN OWN PROPERTIES: A private limited company can own any type of movable or immovable property. Assets and liabilities of the company are typically the responsibility of the company. In case of dissolution of the company, its liabilities are discharged in a specified sequence to the creditors, which reduces the individual liability of the shareholders.

GREATER BORROWING CAPACITY: A private limited company can enjoy multiple avenues for borrowing funds. Banking and financial institutions often prefer to offer financial assistance to private limited companies. They have greater confidence in this type of business entity because of the transparency, compliance and partial data availability on government websites.



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