One of the easiest ways of starting a company in India is to register as a Private Limited Company.
If you are planning to raise funding, Private Limited Company should be the preferred choice. This is because it is a privately held business entity with limited liabilities. Besides allowing a significant degree of separation between operations and ownership, it gives investors a choice of exiting the company without any complications.
Private Limited Company also allows 100% Foreign Direct Investment, without any prior government approval. This helps in taking the business global with ease.
Limited Liability: Businesses often need to borrow money. In structures such as General Partnership, partners are personally liable for all the debt raised. So if it cannot be repaid by the business, the partners would have to sell their personal possessions to do so. In a private limited company, only the amount invested in starting the business would be lost; the directors’ personal property would be safe.
Investment Ready: Private limited companies easily accommodate equity funding as there is a clear distinction between shareholders and directors as well as limited liability. In fact, venture capitalists and private equity funds are unlikely to invest in any other structure. This is because LLPs would require them to become partners in the business, while an OPC can have only one shareholder. This feature also gives you the ability to hire top talent you may not be able to afford by merely paying a salary.
Easy Debt Access: A private limited company has more options for taking on debt than LLPs. Not only are bank loans easy to obtain (relative to OPCs and LLPs), the option of issuing debentures and convertible debentures are always available to it.
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