Nowadays to start a business or settling startup is a fascinating term, but it is inclined with responsibilities and risk-bearing ability and involves many factors which are indispensable in starting the company. If we talk about setting a startup company, the core part is to choose the right kind of business structure of the enterprise for the smooth and efficient functioning of the enterprise. It has been seen that to register your business as a private limited company is more beneficial and advisable due to number of reasons – increase the credibility of the business, provides a large borrowing capacity as one can raise funds easily with a flow of equity shares, or by issuing bonds and debentures, limited liability which will provide safety to your personal assets, at the time of bankruptcy situation.
If one talks about partnership firm registration and sole proprietorship registration, then it is not advisable to take up, especially in the case of startups, when a new company registration in India is done, due to its feature which affects the growth and success of the enterprise.
To register your business as a private limited company, following are the 3 reasons which have been highlighted mostly, in order to register as Private limited company –
1.) Increase the credibility of the business with large borrowing
capacity – Under the private limited company, it is easy to raise the funds and create a pool of it by adding more equity shares to it or by issuing more debt instruments such as bonds and debentures. Banks also preferably provide easy loans to the companies who are registered as a private limited company rather than preferring a sole proprietorship registered company.
Hence, to register your business as a private limited company registration will create a pool of funds, and if we talk about startups, then funding is a crucial point to look for, for maintaining and growing your business.
2.) Safeguard of Personal assets
In case of a sole proprietorship business or partnership, in case of insolvency situation, where the business comes to a shutdown point, then not only your business suffers loss but one’s personal assets are also at risk, as the creditors will have the full legal right to recover debts from your personal assets, but in the case of private limited company registration, one can easily safeguard your personal assets due to limited liability, which is one of the biggest advantages to registering your business as a private limited company, where the shareholders need to contribute the nominal value of shares, hence it provides high-value services to the startups.
3.) Persuades opportunities and assign shares to employees
To register your business as a private limited company, it is more advantageous as it provides a number of opportunities and helps in creating with a unique legal entity, as no promoters are attached with it, which results in the faster growth of the business.
As a private limited company registration, the morale and enthusiasm of the employees also increases as by issuing them stock of the companies which will increase their loyalty towards the organisation and indirectly it will tend to increase the company valuation overall, as when the value of stock increases in the market, it will trigger the growth and success of the enterprise.
For further, a quick analysis has been stated in order to compare different forms of business enterprise, at the time of company registration, one needs to incorporate. From the above discussion, it is quite clear why a private limited company in India is so popular among beginners and other entrepreneurs. Creating a PLC is very easy and can be started with a paid-up capital of zero. In addition, to encourage the youth for start-ups, the Honourable PM of India, Shri Narendra Modi has launched a Start-up India campaign. Under this campaign, start-ups are provided with multiple benefits and a tax rebate for three consecutive years.