If you want to start your business immediately or in future. So you must have heard many people saying that you should start a Private Limited Company. People say that the Private Limited Company has more benefits. So I see one very big advantage in this. The word "limited" in private limited company. This is its biggest advantage. Now, what is this advantage? I will talk about the same in this post. If you want to start your business in future then this post is going to be very important for you.
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| What is Private Limited Company |
1. Individual
When we start a business, then what are the options that we have? We will try to understand the same. The very first option that you have is that you can work as an individual. As an individual, you can work directly. Give the cheques by your name only, As an individual, file your tax returns. Or you can register yourself as the proprietorship firm. In the name of the proprietorship firm, your cheque will come. But you will file your tax return in your name as an individual. For example, many professionals use the proprietorship firm like chartered accountants, engineers, consultants, Interior designers, architects, etc. See there's a very big disadvantage of a proprietorship firm. And that is unlimited liability. Understand unlimited liability. If you have taken a loan for your business or you have some liabilities, you owe money to someone. Or you owe money to the suppliers. Then you have unlimited liability. For example, you have taken a loan of 1 crore from any bank then whatever assets you have, your assets. The bank can sell your assets and recover their money. Please understand this thing very carefully. Because when I will talk about the company. Then the concept will be changed somewhat. Now I will talk about the second option.
2. Partnership
If two or more people want to work, if you want to start your own company then you can register your partnership firm. You'll need a minimum of two persons as directors. I'll give you an example of that also. For example, A has 70% ownership and B has 30% ownership. So in this too, they can work in the name of the company, they can open their accounts, can file tax returns. But there is a very big disadvantage here too. And that is unlimited liability. If there are some liabilities of the company, if they have taken some loans. We will take the same example if the company has taken a loan of Rs1 crore. And they cannot pay that off. So whoever is the director here. Then they will have unlimited liability upon them. The example that we had taken, if A has 70% shares of the company. Let's say he has assets of only 40 lacs. And he cannot give Rs70 lacs. The 70 % will be 70 lacs. Then also if B has more assets, all assets of B will be sold. The Bank will do its recovery by selling all the assets of A and B. In this, your house could be sold, your cars could be sold, All your assets can be auctioned. The third option that we have is a private limited company.
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3. Private Limited Company (C)
As I have already told you in private limited. Limited means a limited liability. Now let's understand what this limited liability is? We will take the old example itself. Let's say A and B are two shareholders. They have started a private limited company. A has 70% shareholding and B has 30% shareholding. So now A and B are two identities, these are two individuals. So the company that they have started, a private limited company It has its own identity, we call it C. Now if we take the same example. Then there is a liability of 1 crore if there is a loan of 1 crore on the company. By chance, the company has come to declare bankruptcy. They have more losses In this case, A and B have limited liability. Still where it is limited, it is limited to their shareholding. The money that they have invested in the company will go. Their assets will not be sold. Bank will do their recovery by selling the company's asset. The company makes their asset by the money invested by the shareholders. Some money is invested by investors or promoters and some money is invested by the bank. So if the bank wants to recover the money. Then it can do it by selling the assets of the company. Let's say the assets of the company is worth 70 lacs. So the bank will get 70 lacs and the bank has to write off the rest of 30 lacs. They cannot touch the personal assets of A and B. This is the biggest advantage of a private limited company. Now there are two types of a limited company I will tell you that also. As I have talked about the partnership.
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So the first is an unlimited partnership. The other one is limited liability partnership, which is also called LLP. So this option is also available to you in India. You can also start a partnership firm as LLP. And the third in this is Public Limited Company. Like in the private limited company, there can be a maximum of 50 shareholders. If there are more than 50 shareholders in a company. Then we call it a public limited company. Or if the company is listed on the stock exchange. Then also it is considered as a public limited company. So whether your company is a Limited Liability partnership or Private Limited Company or Public Limited Company. In this, all the shareholders have limited liability. Nobody will touch your assets. So this I'm the biggest advantage of any limited company. I hope you got quite good information from this post.
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