Establishing a brand new enterprise is a massive decision. The entrepreneur has to make plenty of decisions about his new venture. The structure of the enterprise, legal identity, future growth, and numerous elements play a critical position in its success. It is essential to remember all such elements to eliminate dangers and pitfalls.

While a Private Limited Company gives an extensive variety of advantages to businesses, there are numerous misconceptions that surround this entity. But there’s no point of worrying now as we’ve compiled a list of facts that might help you with incorporating or even existing private limited company and dispelled the myths which might be confusing you about incorporating your Private Limited Company.

1. ANYONE CAN INCORPORATE A PRIVATE LIMITED COMPANY

As per The Companies Act 2013, in maximum cases, a Private Limited Company can be incorporated but there are a set of rules and regulations about who may be a director.

2. ANY NAME CAN BE USED BY THE COMPANY

A degree of freedom is provided while ascertaining your company name, but there are a few rules and regulations that are to be kept in mind. The selected name of the company should not be similar to any other Company’s name.

3. A SINGLE PERSON CANNOT HOLD 100% SHARES IN A PRIVATE LIMITED COMPANY

After the Companies Act 2013, i.e. after April 2014, a single person can incorporate a One Person Company (OPC) as a Private Limited Company and can own 100% shares of a Company.

4. IT IS TIME-CONSUMING AND COSTLY TO INCORPORATE AND MANAGE A PRIVATE LIMITED COMPANY

On the contrary, registering a Private Limited Company takes than 3 operating days if all the files and documents are apt. Also, there has been a perception that registering a Private Limited Company is a very high-priced process because of the paid-up capital requirement of Rs. 1 lakh.  As the requirement of paid-up capital doesn’t exist now, the process of registering a Private Limited Company has now become easier and convenient. There can be costs involved for the daily operations of the business but it might depend on the scale of the company.

5. PRIVATE LIMITED COMPANIES CAN BE INCORPORATED ONLY AT COMMERCIAL PLACES

Many businessmen assume that Private Limited Companies cannot be incorporated in residential or rental premises, which isn’t always the fact. The incorporated company can provide their residential address as office address as well. (Only if the company ought to affix the incorporated name and address of the workplace)

6. A VENTURE MUST HAVE A CERTAIN LEVEL OF SALES TO INCORPORATE A PRIVATE LIMITED COMPANY

This isn’t true, a Private Limited Company may establish from the scratch. Even after registering a Private Limited Company, there is no compulsion that the venture needs to have income or turnover.

7. AFTER REGISTRATION, MODIFICATIONS IN A PRIVATE LIMITED COMPANY ARE COMPLEX

Again this isn’t the reality. Private Limited Company is one of the most flexible commercial structures to be had for startups or businessmen. Even after registration, you can alter its capital, shareholding, dictatorship, and office address as well according to the law.

8. SHAREHOLDERS INVEST IN THE COMPANY WHEREAS DIRECTORS DIRECTS OR MANAGES THE WORKING OF THE COMPANY

In most private companies, directors and shareholders are equal. However, it is not necessary for each of the directors to hold shares in the company.

9. A PRIVATE LIMITED COMPANY ISN’T ALWAYS IDEAL FOR STARTUPS

The structure of a Private Limited Company is profitable for Startups. Whereas this misconception probably originated because of higher compliance requirements and expenses, the characteristics of a Private Limited Company are more suitable for startups as they make the business more sustainable.

10. A PRIVATE LIMITED COMPANY CAN’T BE SHAREHOLDERS OR INVEST IN ANY OTHER PRIVATE LIMITED COMPANY

A Company is also known as an “artificial person”. So once registered, it may make investments in the stocks of any other Private Limited Company.

11. TRANSFER OF SHARES AND SALE OF THE PRIVATE LIMITED COMPANY IS DIFFICULT

Irrespective of few obstacles to the transfer of shares in a Private Limited Company, the securities of the company are transferable, making it less complicated to subscribe, transfer of ownership of the company or to discontinue the company.

It gets convenient to discontinue or sell off the business if it is incorporated as a Private Limited Company as its credibility is higher as compared to some other form of business

CONCLUSION

Selecting the most suitable business form goes a long way in figuring out our Company’s future. To determine which form of business is appropriate for your Company, there are factors that need to be taken into consideration like the size, fundraising strategies, etc.

Private Limited Companies have a large number of compliances as compare to other forms of businesses. The incorporation of a company thus has its own pros and cons. Incorporation greatly depends on the needs of the business, if the members perceive the business as scalable then the high incorporation costs are completely justified.

Udyog Buddy has satisfied a lot of their clients by busting the myths and getting their companies incorporated. We are a team of professionals who will help you to get your company registered at an affordable cost. If you need assistance in choosing the right form of business, we are here to have your back.

Contact Us for further details and we’ll help you make your business a reality without breaking your bank. It is best to apply for this Opportunity with the help of experienced professionals and incorporate your company without “Hassles or Hiccups”.

To avail of all the Company formation services and get an Edge Over Your Competitors Call/Whatsapp +91 9301789019 or email at [email protected].