Advantages and Disadvantages of Private Limited Company

(Private limited company advantages and disadvantages). The private limited firm can easily be initiated and documented with the collaboration of two members. As stated by section 2(28) of the companies ordinance 1984 a private Limited company relates to a company which according to its Articles of Association:

• Confine the rights to transfer the shares to any person
• The members should be up to 50 in total
• Avoid any interaction to the general public in order to pledge for the shares

The routine affairs of management are performed by the directors. Books of accounts are normally prepared organized and their audit is necessary annually. The company can be closed with the consent of the members and also through legal authorities. The shareholders in Pvt. Ltd company are quite known for each other due to close connection.

Advantages Of A Private Limited Company

Private companies do have the following advantages:

1. Members are quite aware of each other but the total control is in the hands of the one who owns the capital.
2. There is great flexibility in the management of affairs and the conduct of business.
3. A statuary meeting is not needed along with submitting the statuary report.
4. There should be two directors in a private limited company.
5. The liability is limited because of which the members enjoy the facility.
6. The company can be started immediately after getting the certification.

Disadvantages Of The Private Limited Company

Disadvantages of the private firm according to section 2(25) of company ordinance are as follows:

1. Private firm restrict the transferability of shares by articles
2. The number of members cannot exceed more than 50
3. This cannot issue prospectus to the general public
4. Their share cannot be quoted in the stock exchange.

Characteristics Of Private Limited Company

The characteristics of a Private Limited Company are listed below:

• This can be created with the help of two members but the total number of members does not exceed 50.
• A certain limitation is attached to filling the prospectus of the statement in accordance with the prospectus with the register.
• The business can start after documentation without any certification.
• Statuary meeting is not required along with statuary report.
• There should be at least two directors. However, the maximum numbers of directors are mentioned in the article.
• The directors can have a loan even without approval from the government.
• In order to make a quorum, it is important that there should be at least two members in the meeting.
• The directors are being paid and the staff does not have such restrictions.
• The financial report which includes the balance sheet and profit and loss is not required to send it to the registrar.
• Word private is necessary to be placed at the end of the company name.

Remember

According to the Companies (Amendment) Ordinance 2002, a new concept of a single-member private company (SMC) has been introduced to admit the individual businessman in the corporate sector as a company having limited liability. In the case of a single-member private company, the quorum shall be single-member present in person or by proxy.