10 Dec 2016
A private limited company is an organization created with an aim to carry on business and earn profit. It enjoys certain advantages in its wake. Here are some.
1. Separate legal entity
An entity is something which has a existence of its own, a distinct and real one. A company is a legal entity by means it is registered and established under a certain Act. It is through its legal capacity it can own property and enter into legal contracts. The members of a company are not liable for the company's debts to its creditors. A private limited company therefore has a separate legal entity different from its member, hence a artificial person.
2. Perpetual succession
A company can carry on for a unlimited period of time until it is legally dissolved. It enjoys uninterrupted existence in the sense that the company is not affected by a death or departure of any of its member. It continues its operations like before.
3. Limited liability
Limited liability of a company implies that a member of a company is liable to the debts of the company only to a limited amount, unlike in case of proprietorships and partnerships where the limited is unlimited.
The liability of the members is limited only to the face value of the shares held by them. In a company limited by shares, the liability of the member is limited only to the unpaid value of shares held by them at the time of winding up of company.
4. Easy transferability of shares
A member of a company limited by shares can transfer his shares to any other member willing to take them. The transfer of shares is flexible by just filling a share transfer form and handling over the shares to whom the shares are transferred along with share certificate.
5. Owning property
A company owns, acquire, and alienate property in its own name. No member of a company can claim company's property as its own as long as it is a going concern. A company is a juristic person and its true owner. No shareholder is a member of the company.
6. To sue and be sued
A company has a power hold proceedings against any suit in a court of law in its own name in a way just as a person has. Moreover, a company can be sued in a court of law by any other legal entity.
7. Dual relationship
It is possible in a private limited company to enter into contract with any of its members. Therefore, a person enjoys a dual relationship with a company both as an employee or shareholder, creditor and director of a company.
8. Borrowing capacity
A company can issue debentures and also accepts deposits. It can easily borrow large funds from banking and financial institutions.
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