Advantages of a Private Limited Company:
- Limited Liability: Shareholders are only liable for the company’s debts up to the extent of their shareholdings, protecting personal assets.
- Distinct Legal Identity: The company has its own legal identity, enabling it to own assets, enter contracts, and initiate legal actions.
- Continuous Existence: The company’s existence is unaffected by changes in shareholders or directors.
- Ease of Funding: Raising capital through share issuance is simpler, attracting external investment.
- Tax Benefits: Eligible for various tax benefits and exemptions, making them tax-efficient entities.
- Credibility and Trust: Having “Pvt. Ltd.” in the company name instills confidence in stakeholders.
Disadvantages of a Private Limited Company:
- Compliance Burden: Subject to regulatory demands including financial reporting, filings, and audits.
- Complex Setup: Setting up and managing involves higher costs and processes compared to simpler structures.
- Share Limits: Restrictions on share transfers, limited to a maximum of 200 shareholders in India.
- Public Disclosure: Financial information is publicly viewable, impacting privacy.
- Exit Complexity: Selling or exiting the company is more complicated compared to other structures.
- Slower Decision-Making: Involvement of shareholders and directors may lead to slower decision-making processes.
