Private limited company pros and cons

What are the pros and cons of a limited liability company? Are private limited companies attractive to entrepreneurs? Pros Limited Liability. In case the private limited company has debt and losses , the only liability by the shareholders is only up to the amount they individually invested.

Their personal assets, the salary earned as an employee of the company, real estate properties, etc. Private limited companies are tax efficient because there are many benefits to enjoy. You still have a limited liability in case something bad happens.

Some of the major disadvantages include: A more complicated setup – becoming a limited company can, of course , come with a huge range of benefits , but it is quite complicated to setup. For example, if you are operating as a sole trader , it may be more money and hassle than it’s worth to register as a private limited company if you are not earning above a certain tax threshold. The number of members cannot exceed more than 50. This cannot issue prospectus to the general public. Shareholders have limited liability , but directors are personally liable, if they are knowingly part of running the.

Transfer of ownership can be done with ease. Although there are more personal risks assumed in this business structure than others, the end result can be profitable for everyone involve especially the limited partner. One of the major advantages of being a private corporation is the ability to make fast decisions. Large corporations may have a large board of directors, with a number of officers and shareholders.

Therefore, large corporations have to undergo votes by all shareholders to decide on corporate initiatives. It can issue debentures, secured as well as unsecured and can also accept deposits from the public, etc. Even banking and financial institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns. As a limited company, you can sell shares to investors.

Disadvantages of Private Limited Company. As a sole trader, however, you can only really seek investment if you turn your business into a partnership. You’ll probably find more opportunities to borrow money as a limited company, as some banks choose to only lend to limited companies. Director Legally Responsible and Liable.

Although a Limited Company is its own entity and therefore liable for itself, the liability does have to fall somewhere and if you are a director or co-director then you are liable to the amount of capital that you originally put into the company. They can then divide the profit among themselves, the tax rate on which is again very less. The limited company business structure is the second most popular in the UK. The advantages include tax efficiency, separate entity and professional status. Some disadvantages include complex accounts, public records and accountant fees.

Although private limited companies have a separate legal identity from their owners and enjoy some tax breaks, shares cannot be traded in a stock exchange, business information is made public, and founders may emerge with limited personal control. The main advantages of owning a private company limited by shares are: They are tax efficient, particularly compared to running a business as a sole trader. A company structure provides the advantages of limited liability, growth potential, and certain tax efficiencies.

However, setting up and operating a company is more expensive, can have certain tax disadvantages, and it highly regulated. Whilst running a limited company does have its fair share of responsibility, and the administrative responsibilities are certainly greater than other ways of working, there are many advantages too. Limited liability - In simple terms, if you run a Limited Company you are protected should things go wrong. While with a limited company you can maintain control over who has shares, this is a lot more difficult to achieve with a PLC.

If you are the original owner of the company you could find yourself in the position where you lose control over your business because someone has bought up a significant amount of shares. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them. Shares of Private Limited Company cannot be publicly traded. Here are some advantages and disadvantages of a Private Limited Company.

With a sole trader, the business and the owner is the same legal entity, so if anything goes wrong or if the business owned money, the owner would be personally liable. You may also encounter less opportunity for growth and promotion at a small firm, and most likely, there will be fewer people who can serve as mentors. Plus, at a smaller company , if you do not get along with your co-workers, avoiding them may be difficult.

This provides an important element of security for those who own and manage the business.