If you’re an entrepreneur, you know how important it is to protect your business and personal assets. Starting a business comes with risks, and taking steps to minimize those risks is crucial. The best way to do that is by registering your business as a Pvt Ltd company. In this article, you’ll explore why company registration is a smart move.
Asset Protection
Asset protection is one of the key reasons for registering your business as a Pvt Ltd company. Registering your business as a Pvt Ltd becomes a separate legal entity. This means that the company’s liabilities are not the liabilities of its owners or shareholders. If something goes wrong with the business, such as bankruptcy or legal action against it, only the assets owned by the company can be used to pay off any debts or liabilities.
The shareholders’ assets are not at risk in case of any financial losses incurred by the company. This provides additional protection for entrepreneurs who want to start their businesses without risking everything they own.
Credibility Boost
Another advantage of company registration is increased credibility among customers, vendors, investors, and other stakeholders. A registered Pvt Ltd gives an impression that the company has undergone government scrutiny and has met all legal requirements for doing business.
This makes it easier for businesses to find new clients and suppliers who prefer dealing with registered companies over unregistered ones. It also makes it easy for businesses to apply for loans from banks and financial institutions since being registered increases their chances of getting approved.
Tax Benefits
Registering your business as a Pvt Ltd also offers tax benefits compared to other forms of businesses like sole proprietorship or partnership firms. As per Indian law, private limited companies are taxed at 25% on their profits, while individual taxpayers can be charged up to 30% on their income, depending on their income bracket.
Moreover, expenses incurred while running your Pvt Ltd, like salaries paid out to employees or rent paid for office space, can be claimed under deductions which can significantly reduce taxable profits, thereby saving taxes.
Continuity & Perpetual Succession
A registered Pvt Ltd enjoys continuity in operations even if one or more directors resign from their positions due to death, incapacitation, or resignation since it’s treated as a separate legal entity under Indian law, unlike a sole proprietorship firm which ceases operations after death/incapacitation/resignation/death of the owner(s).
Perpetual succession refers to uninterrupted existence even if ownership changes hands through transfer/sale/demise/retirement etc., ensuring smooth transition without affecting day-to-day operations, thereby providing long-term stability, which helps attract investors/partnerships, etc., in the future.
Raising Capital
Raising capital through equity shares issued by Pvt ltd may prove easier than raising funds through debt financing since lenders may hesitate to lend money without collateral security. In contrast, equity investors invest based on potential growth prospects rather than collateral security, making it easy for startups looking to raise funds quickly without pledging assets/collateral security.
Conclusion:
Pvt Ltd registration is a smart move for entrepreneurs who want to protect their assets and minimize risks associated with running a business. It offers numerous benefits such as increased credibility, tax benefits, continuity, perpetual succession, and ease of raising capital. Registering your business as a Pvt Ltd ensures long-term stability and growth opportunities while minimizing the risks of starting and running your business.
