A private limited company is the most reputed form of carrying business in India. The minimum number of members in private limited company is 2 and maximum number of members is restricted to 50. A private limited company is considered as a separate legal entity. A private limited company name ends with ‘Private Limited’. A Private limited company may issue shares and have shareholders. However, these shares do not trade on stock exchanges and are not issued through an initial public offering. Shareholders may not be able to sell their shares without the agreement of the other shareholders. A 'Private Company' is, as an entity, registered under the Companies Act, 1956. Following are the important highlights:
- Minimum and maximum number of shareholders are 2 and 50.
- Minimum paid-up capital should be Rs.1,00,000.
- Minimum number of directors are 2.
- Less compliance as compared to public company.
- Private company cannot issue shares to the public.
- Restriction on shares transfers as per the articles of the company.
- Private company cannot accept deposits from the public.
- Private company can accept loans and deposits only from its shareholders,
directors and directors' relatives.
- Limited Liability: It means that if the company experience financial
distress because of normal business activity, the personal assets
of shareholders will not be at risk of being seized by creditors.
- Continuity of existence: business not affected by the status of the owner.
- Minimum number of shareholders need to start the business are only2.
- More capital can be raised as the maximum number of shareholders
allowed is 50.
- Scope of expansion is higher because easy to raise capital from financial
institutions and the advantage of limited liability.
- Growth may be limited because maximum shareholders allowed are only
- The shares in a private limited company cannot be sold or transferred to
anyone else without the agreement of other shareholders.