Why Private Limited Company is not Good Option?

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With This Article Why Private Limited Company Registration is not a Good Idea, I would Like to throw some light on facts as to why you should not choose Private Limited Company as your Business structure to carry out your business activities.

Private limited company
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Before we begin I would like to give a Brief introduction of what is Private limited company that will enable you have clear understanding of Private Limited company.

What is Private limited company?

Private Limited company is a type of Business entity or Business structure where minimum of 2 and Maximum of 200 members are required to form a business, the shareholders and members Have limited liability , it means that the Liability of shareholder is limited to extent of shares taken up by him, a private limited company needs to have 2 directors to come into existence, The Private Limited company has a separate legal identity, Private limited Company registration is governed by Indian Companies act.2013, and It is necessary to Mention Pvt Ltd After the company name.

Why Private Limited Company Registration is not a Good Idea?

Below I will give you some points that will help in understanding the fact why you should not opt for Pvt Ltd Company Registration in India:

  • Private Limited company is Not suitable for Startup, micro and small business: If you are an owner of micro and small business in India, then you should not opt for private limited company as it is more suitable for medium and Large scale businesses that have more than 5 lakh in terms of investment in business operation and can also Bear the Huge cost that incurs in everyday running of business activities.
  • Private Limited company registration is costly, time consuming and complex process: Registration of Private Limited Company is a complex process that involves a lot of compliances and Steps to commence business. If you are planning to start a startup business, small business or medium scale business then you should consider Partnership or llp registration or sole proprietorship registration to register your business structure.
  • Management of a company is also very Difficult and hard : managing affairs of Private Limited Company can be very hard and Decision making process in private Limited Company is also very difficult as you have to follow proper company hierarchy to take decision regarding your Department or unit and You need to Communicate in formal way to manage the company.
  • Private Limited company are taxed Highly : The Private Limited Company has to File for taxes yearly without any delays and negligence and the rate of Tax is also high compared to Other Entities such as Partnership, Sole Proprietorship, Limited Liability Partnership and One person company etc. The Private Limited Company are also not given good relief regarding taxation in India. Other entities enjoy tax benefit and Exemption under certain scheme in India.
  • Private limited Companies have to bear Yearly Compliance Cost: The Private Limited Company has to File Tax mandatory in India and have to conduct audit, have to Hold Board meetings and Annual meetings that increase the compliance cost for Private Limited Company.
  • Private Limited Company has huge disadvantages : It cannot quote share on stock exchange, It cannot issues prospectus to general public, it has higher administrative costs as company needs to Appoint director , company secretary , accountant etc. that adds in cost of running a company and the owner have limited personal control as owners cannot make decision without consulting other members.
  • Private Limited company cannot be closed down easily: To close down or dissolute a company you have to follow all the legal procedure that are mentioned in Companies Act, 2013. An Organization cannot exit market easily, if it is Private Limited Company. However, there is free entry and exit if you choose LLP, Partnership and Sole proprietorship etc. as Business structure.

Conclusion

In The end I would like to Inform You that Choosing a Business Structure for your business is very important and Crucial for the success of Business. Before you select any business entity that you will adapt as business model you need to make sure you study all its merit and Demerits. You also need to make sure that you are aware of your capability as businessmen. As Here I have Discussed about Private Limited company and have told you about Why Private Limited Company Registration is not a Good Idea, So when You are Planning to open a business you need to keep all the points listed above  in your  mind .