10 Things why you should not form a private limited company

10 Things why you should not form a private limited

While forming any business everybody go through a very difficult situation and that is whether they should form a Private limited company or not as they have many choice other than private limited company. And in this situation people always search for the advantages and disadvantages so that they can easily have an idea about the situation in which they are going to be and be aware from all the issues.

While forming any business everybody go through a very difficult situation and that is whether they should form a Private limited company or not as they have many choice other than private limited company. And in this situation people always search for the advantages and disadvantages so that they can easily have an idea about the situation in which they are going to be and be aware from all the issues.

So here first of all let’s know about what is the private limited company.

Private limited company is a business entity which is made for the medium and large size of business, however being continue with a private limited company is not an easy task for small business entities.

So here let’s have look on the disadvantages of the private limited company and why we should not form such company in future.

Registration process: – if we talk about the process of registration then it is the long lasting process which will take around 10-15 days and the cost will be approx 16000 including all the things, which is too high as compare to proprietorship.

Ownership right: -One of the Major disadvantages is that if any entrepreneur who have desire to operate pvt. Ltd. Company then they can’t operate solo as in the section 149(1) of the companies Act 2013 it’s important to have at least 2 directors in the private limited company and 3 directors should have in public companies and a single director in one person company.

Equal right: -In the private limited companies the directors are not eligible to take their own decision. If they want any changes or any kinds of decision to be taken then they must have to take consent of all the existing partners and if any one of them is disagree from the decision then it will be against of the company act 2013.

Loan Liability: -let’s suppose if the pvt. Ltd company have taken the loan then at the time of repayment of the loan all partners are equally liable for the repayment instead of the single person but the ratio of the loan repayment will be according to their company’s deed. There are also few things to be noted while talking about the liability is that no matter what’s the nature of the company if the name of company is Mis-discribed and have done the contract. Then the partners will be liable to pay the loan liability.

Company’s wind up:-Aswe know the registration of a private limited company are very costly and time consuming same as that the process of winding up are also time consuming and costly as well. However the members of the company should register their self only when they are concern towards promoting their business or want the company to grow up with the serious mind set.

Compliances of the private Equal right: -In the private limited companies the directors are not eligible to take their own decision. If they want any changes or any kinds of decision to be taken then they must have to take consent of all the existing partners and iEqualf any one of them is disagree from the decision then it will be against of the company act 2013.limited company: -If we talk about the compliances under section 134 then there are bunch of compliances as following which is literally not easy at all.

  • Board meeting: – Inthe board meeting at least 4 board meetings should be done in the whole year and at least 1 meeting in the quarter and the in the meeting at least 2 directors or 1/3 of the director whichever is greater should be present in the board meeting.
  • Annual general meeting: – In the AGM gathering of all the shareholders of the company is mandatory within the 6 month from the closing date. In which use to do the approval of financials, appointment and re-appointment of auditor, director’s remuneration, dividends etc. the AGM must be held at the registered office.
  • Director’s report: – In the director’s report directors have to declare about their directorship of other companies every year. And it should be declared on that director’s report with signature.
  • Maintaining the statutory register and minutes book:– there are few registers which should be maintain and that is register of member, director, contract, and the last register of charges. And the registers must have to keep in the registered office.

And many more compliance is required including the ROC works as well. So that’s why it is said that why we should always lead our business towards simplicity and all the entrepreneur can grow their business with the ease.

first of all let’s know about what is the private limited company.

Private limited company is a business entity which is made for the medium and large size of business, however being continue with a private limited company is not an easy task for small business entities.

So here let’s have look on the disadvantages of the private limited company and why we should not form such company in future.

Registration process: – if we talk about the process of registration then it is the long lasting process which will take around 10-15 days and the cost will be approx 16000 including all the things, which is too high as compare to proprietorship.

Ownership right: -One of the Major disadvantages is that if any entrepreneur who have desire to operate pvt. Ltd. Company then they can’t operate solo as in the section 149(1) of the companies Act 2013 it’s important to have at least 2 directors in the private limited company and 3 directors should have in public companies and a single director in one person company.

Equal right: -In the private limited companies the directors are not eligible to take their own decision. If they want any changes or any kinds of decision to be taken then they must have to take consent of all the existing partners and if any one of them is disagree from the decision then it will be against of the company act 2013.

Loan Liability: -let’s suppose if the pvt. Ltd company have taken the loan then at the time of repayment of the loan all partners are equally liable for the repayment instead of the single person but the ratio of the loan repayment will be according to their company’s deed. There are also few things to be noted while talking about the liability is that no matter what’s the nature of the company if the name of company is Mis-discribed and have done the contract. Then the partners will be liable to pay the loan liability.

Company’s wind up:-Aswe know the registration of a private limited company are very costly and time consuming same as that the process of winding up are also time consuming and costly as well. However the members of the company should register their self only when they are concern towards promoting their business or want the company to grow up with the serious mind set.

Compliances of the private limited company: -If we talk about the compliances under section 134 then there are bunch of compliances as following which is literally not easy at all.

  • Board meeting: – Inthe board meeting at least 4 board meetings should be done in the whole year and at least 1 meeting in the quarter and the in the meeting at least 2 directors or 1/3 of the director whichever is greater should be present in the board meeting.
  • Annual general meeting: – In the AGM gathering of all the shareholders of the company is mandatory within the 6 month from the closing date. In which use to do the approval of financials, appointment and re-appointment of auditor, director’s remuneration, dividends etc. the AGM must be held at the registered office.
  • Director’s report: – In the director’s report directors have to declare about their directorship of other companies every year. And it should be declared on that director’s report with signature.
  • Maintaining the statutory register and minutes book:- there are few registers which should be maintain and that is register of member, director, contract, and the last register of charges. And the registers must have to keep in the registered office.

And many more compliance is required including the ROC works as well. So that’s why it is said that why we should always lead our business towards simplicity and all the entrepreneur can grow their business with the ease.

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