There are many reasons why entrepreneurs register a company. A company is an independent legal entity with perpetual succession. This is one of the reasons why entrepreneurs choose to register a business. A company is unaffected by the death, insanity or insolvency of any of its members. These are the top reasons you should register a private limited business in India.
1. Separate Legal Entity
A company is an artificial judicial entity created under the Companies Act. The company is an independent legal entity, separate from its directors and shareholders. A company has a greater legal capacity to acquire property and make debts, while its shareholders have no liability to the company’s creditors.
2. Perpetual Succession
Perpetual succession is the continuation or persistence of a company’s existence forever. A company is legally active until it is liquidated by its members in a legal proceeding. Perpetual succession means that a company or corporation continues to exist until it is legally dissolved. A company is not affected by the death or departure of any member.
3. Limited Liability
Limited liability refers to legal responsibility for a restricted amount of debts. Members are only liable for the company’s debts. They are only liable for the unpaid face value of any share they have purchased. Directors of companies are often subject to limited liability. They are responsible for the operation of the company.
4. Transferability of Shares
The ownership of a private limited company is determined by the number of shares held by its shareholders. Shares of a company can be transferred to any other person or legal entity in India or abroad, subject to the articles of association of a company and the shareholder’s agreement. The easy transferability of shares is one of the top reasons. Entrepreneurs opt to register a company.
5. Owning Assets
A company can acquire, own, transfer any type of tangible or intangible asset in India. A shareholder is not eligible to claim the company’s property, as they are not owners of the company. A shareholder merely has an interest in the company arising under the articles of association of the company, measuring a sum for liability.
6. Equity Raising
Only a company can be used to raise equity funds from Angel Investors, Private Equity Firms or through IPOs. Private limited companies are sufficient for raising equity funds from Angel Investors or Private Equity Investors. A Limited Company is required in the event of listing or allotment to shares to more than 200 shareholders.
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