A Private limited company, or LTD, is a type of privately held small business entity. This type of business entity limits owner liability to their shares, limits the number of shareholders to 50, and restricts shareholders from publicly trading shares.
Let's look at some of the advantages of having a private limited company.
During the recent recession, many businesses experienced financial problems and permanently closed. One advantage of owning a private limited company is that the financial liability of shareholders is limited to their shares. Therefore, if a private limited company was in financial trouble and had to close, shareholders would not risk losing their personal assets. Although, perpetrating a fraud related to the private limited company would negate an owner's limited liability protection.
Restricted Trade of Shares
The restriction placed on the sale or transfer of shares may be considered an advantage or disadvantage, depending on your outlook. It is an advantage to some shareholders because shareholders who want to sell shares cannot sell them to outside buyers. Shareholders must also agree to the sale or transfer of shares; therefore, the risk of hostile takeovers is low. The restriction placed on the sale of shares is a disadvantage because shareholders have limited options for liquidating shares.
Procedure and Steps Taken for Register a Private Limited Company :-
Step 1. Application for Director Identification Number (DIN) in form DIR-3 & DSC (Digital Signature Certificate).
Step 2. Search for the Company Name availability.
Step 3. Application for the Name availability.
Step 4. Drafting of Memorandum of Association (MOA) & Articles of Association (AOA).
Step 5. Filing of e-forms with RoC (Registrar of Companies).
Step 6. Payment of RoC Fees & Stamp Duty.
Step 7. Verification of documents / forms by RoC
Step 8. Issue of Certificate of Incorporation by RoC