Can a Private Limited Company be the right choice for you?
When you hear the word “private limited company”, you often get a thought that private company means small company with little interest. Well, that’s not true. The biggest companies of India, like Infosys, Reliance industries, Wipro Ltd. Etc are private companies.
In a public company, regulation and ownership of shares can be sold to the public on the open market. On the other hand, private company shares can be sold or transferred to other people by the choice of owner. Shares of such limited companies are owned by founders, management or a group of private company investors. Limited company Shares here are not sold in the open market. Thus there will be less no. of limited company shareholders, this means less complexity and confusion in decision making and management.
For a private limited company, the minimum number of required company shareholders is 2, whereas, for a public limited company, you require a minimum of 7 company shareholders.
Sometimes legal documents & formalities can be very expensive and time consuming, aren’t they? If you’re planning to start a public limited company, you better be prepared because there is a long list of legal documents formalities for forming a public limited company. Private limited companies have a comparatively shorter list.
Public limited company is required to disclose their financial reports to the public every quarter, as it will affect public company investment; private companies are not subjected to any such compulsion.
Management and Decision making process becomes more complex and confusing in public limited companies as more no. of company shareholders are to be consulted. This complex process is eliminated in private limited company as the no. of company shareholders is less.
Managers of public limited company are focused on increasing the value of company shares, whereas managers of private limited company are more flexible in short term and long term company business decisions.
Private limited companies are not pressured by the stock market and they don't have to worry about shareholder expectations and interference as long as they work within law. Shareholders in public limited companies are focused on current earnings and they exert pressure on the public company to increase earnings.
Managers of public limited companies are pressurized to grow earnings in the short term goal in order to increase the value of their stock.Private limited companies can focus on long term earnings as such pressure is eliminated.
You will need a lot of money for a public limited company register in india. A public limited company is required to have a minimum share capital of Rs.5, 00,000. For a private limited company, the earlier minimum number of share capital was Rs.1, 00,000. Therefore there is no pressure of company fund requirements.
It is obviously not appropriate for your competitors to know about your business plan & secrets.
Confidential information such as executive compensation, legal documents & settlements and other sensitive business information cannot be kept confidential in public companies. Such information is more secure in private limited company.
So therefore, a Private limited Company is less complicated as compared to public limited company. It is comparatively less expensive and less time consuming.
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