THE ADVANTAGES OF HAVING A PRIVATE LIMITED COMPANY AS BUSINESS ORGANISATION
Unlike proprietorships and partnerships, private limited companies enjoy certain exemptions and privileges, whichare peculiar to their constitution and nature. A private limited company is variously described as,
etc. A private limited company also has many advantages over proprietorshipsand partnerships, as elaborated below.
1. Limited Liability
First and foremost benefit of trading/doing businessvia a private limited company has always been thelimited liability conferred upon the company'sdirectors and shareholders. As a sole trader or partnershipbusiness,personalassetsoftheproprietor or partners can be at risk in the event of afailure of the business, but this is not the case for aPrivate limited company. As long as the business isoperated legally,
personalassets are not at risk in the event of any businessindebtness or winding up. The unfortunate eventslike business failures are not always under our owncontrol.If a limited company becomes insolvent and iswound up only the assets of the company are usedto clear its debts. The officers of the company haveno personal liabilities and are not made bankruptand are free to incorporate another company. Bycontrast, if you do business as a partnership or asan individual, the creditors can claim on all your property to satisfy the debts, and if this is insufficientyou may be declared bankrupt. An underchargedbankrupt is forbidden to start another business or tobecome a director of a Private/Public limitedcompany.
2. Legal Entity/Status or Recognition
A private limited company is a legal entity, a juristicperson established under the Act. It has its existenceseparate from its directors and members.Private limited company status enables you to betaken more seriously than a proprietorship/partnershipstatus does.Operating as a private limited company often givessuppliers and customers a sense of confidence in abusiness. Larger organisations in particular will prefer in dealing with private limited companies thanproprietorship/partnership organisations.Easy to attract quality workforce and achieve strategicmotivation of employees by using flexible and widerange of management designations.
3. Perpetual Succession
Another important characteristic of a private limitedcompany is perpetual succession. It is a popular saying that the directors may come and go themembers may come and go, but the existence of acompanyremainsforever.Acompanyonceincorporated remains alive unless and until it is woundup by complying with the respective provisions of theAct. The death, disability or retirement of any of its