A private limited company is a privately-held business entity. It is held by private stakeholders. The liability arrangement in these is that of a limited partnership, wherein the liability of a shareholder extends only up to the number of shares held by them.
Characteristics of a Pvt Ltd Company
Now that you know what a private limited company is, the next step is to know the characteristics of such a company:
- Membership: Like any other company, a minimum of two shareholders are required in order to start such a company. But since it remains a small entity, there is also a maximum cap on the number of members fixed at 200. There is also a requirement of two directors to run the company.
- Limited liability structure: In a private limited company, the liability of each member or shareholder is limited. Therefore, even in the case of loss under any circumstances, the shareholders are liable to sell their own assets for repayment. However, the personal and individual assets of the shareholders are not at risk
- Separate legal entity: This is a separate legal entity and continues in perpetual succession. This means that even if all the members die, or the company becomes insolvent or bankrupt, the company still exists in the eyes of the law. The life of the company will be perpetual, not affected by the lives of its shareholders or members unless dissolved by way of resolution.
- Paid-up capital: A private limited company requires to have and maintain a minimum paid-up capital, as prescribed by MCA from time to time