Benefits of PVT Ltd Company
A private limited company is regarded as a corporation by the law and it shares a couple of common features with other corporations. The only difference is that a private limited company is operated and also owned by a very small number of people. There are numerous benefits of a private limited company as shown below.
1. Limited liability
The major reason why a person would opt to form a private limited corporation is limited liability. For instance, if the organization fails or is sued, the only claimable assets are the ones the shareholders placed in the company. This means that personal assets and money are not going to be included as claimable assets. In the sole proprietorship, in which the business has a single owner, the manager’s personal money and assets can be detained through a court order to settle business debts. Nevertheless, the liability of the investors in the private limited firm is restricted to what they financed in the company.
2. Reduced taxes
The other huge advantage of setting up a private limited company is that it enjoys tax benefits. The main reason for these tax benefits is that this particular company is highly flexible with regards to being capable of determining the amounts of dividends and salary taken. This is unlike a sole manager whose accounts are taxable at the fixed tax thresholds and rates.
3. Better performance
Forming a private firm enhances the number of skills in a business. In the sole proprietorship, the owner is assumed to possess all the necessary knowledge and skills for making all decisions about the firm. However, allowing private capital sources in the business also increases the amount of resources that a founder can depend on, thereby enhancing performance.
The main private limited company demerit is that all profits made in the business have to be shared by shareholders.