Thursday, March 5, 2009



A private limited company is a voluntary association of not less than two and not more than fifty members, whose liability is limited, the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures. Its main features are :-

It has an independent legal existence.
The Indian Companies Act, 1956 contains the provisions regarding the legal formalities for setting up of a private limited company. Registrars of Companies (ROC) appointed under the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies floated in the respective states and the Union Territories.

It is relatively less cumbersome to organize and operate it as it has been exempted from many regulations and restrictions to which apublic limited company is subjected to. Some of them are :-
it need not file a prospectus with the Registrar.
it need not obtain the Certificate for Commencement of business.
it need not hold the statutory general meeting nor need it file the statutory report.
restrictions placed on the directors of the public limited company do not apply to its directors.

The liability of its members is limited.

The shares allotted to it’s members are also not freely transferable between them. These companies are not allowed to invite public to subscribe to its shares and debentures.
It enjoys continuity of existence i.e. it continues to exist even if all its members die or desert it. Hence, a private company is preferred by those who wish to take the advantage of limited liability but at the same time desire to keep control over the business within a limited circle and maintain the privacy of their business.


Continuity of existence. It is a separate legal entity meaning assets can be purchased in its own name.
Limited liability
Less legal restrictions
Recognition while dealing with foreign countries as a Corporate entity.
No limit for managerial remuneration.


Shares are not freely transferable
Not allowed to invite public to subscribe to its shares
Scope for promotional frauds
Undemocratic control
Taxability of Income of the Company as well as the dividend distribution in the hands of the Company.

Tax Rates for a Company in India

In case of the Domestic Company , the Income is charged at 30% flat.

Surcharge is applicable @ 10% for companies having total income exceeding Rs.1 Crore
Educational Cess @ 3% is also applicable for all firms

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