Private Limited Company is preferred structure by startups because of stability and growth opportunities offered by this structure. Further, it assures separate legal existence from its members. So, it can involve into contracts and legal proceedings in its own name. Moreover, a company’s status is unaffected from any change in members and management.
Separate managerial board i.e. Board of Directors is beneficial for members interested for investment purpose. Where Board works on remuneration, the members receive profit sharing in form of Dividend.
It also offers various funding options in form of private equity, ESOP and more. This makes it more suitable for external funding options. And thus, it is more preferred by VCs, Angel Investors, and other outside funding agencies compared to any other business structures. It also is rather preferred by banks and lending agencies because of the credibility that it holds as a corporate structure.
A private company is eligible to take benefit of registration under Startup India Scheme of Government of India. This scheme avails multiple benefits including tax exemptions for the recognised startups.
Because of these reasons, it is the priority for both family-based businesses and start-ups. Where service-based businesses tend to choose LLP, Pvt Ltd is suitable for productbased and growth-oriented businesses.
Here is a list of features that differentiate a public company from a private limited company:
|Features||Private Limited Company||Public Limited Company|
|Invitation to Public||No||Yes|
|Issue of Prospectus||No||Yes|
|Quorum at AGM||2 Members||5 Members|
|Certificate for Commencement of Business||No||Yes|
|Term used at the End of Name||Private Limited||Limited|
|Managerial Remuneration||Can not exceed more than 11% of net profits||No Restriction|
|Statutory meeting (Mandatory)||No||Yes|