1. Key Features of an PLC:

Limited Liability Protection:Shareholders' liability is limited to their shareholding, protecting personal assets from company debts.

Separate Legal Entity:The company is distinct from its owners and directors, allowing it to own property, enter into contracts, and operate in its name.

Minimum and Maximum Members:A minimum of 2 shareholders and 2 directors is required.The maximum number of shareholders is capped at 200 (in most jurisdictions).

Public Share Trading: Unlike public companies, shares of a private limited company cannot be traded on stock exchanges.

Perpetual Succession:The company continues to exist even if shareholders or directors leave or pass away.

Compliance and Regulation:It is subject to corporate laws and regulations, requiring regular filings and audits.

2. Advantages of an PLC:

Liability Protection: Protects personal assets of shareholders.

Separate Entity: Legal independence allows smooth operations and asset management.

Continuity: Business remains unaffected by changes in ownership.

Credibility: A formal structure enhances trust and market reputation.

Ease of Fundraising: Equity financing options attract private investors and financial institutions.

Flexibility: Suitable for businesses ranging from startups to medium-sized enterprises.

3. Disadvantages of an PLC:

Compliance Requirements:Companies must comply with legal obligations like annual filings, tax audits, and board meetings, which can increase costs and complexity.

Restricted Ownership:Shares cannot be traded publicly, limiting fundraising options compared to public companies.

Formation Costs: Initial setup requires registration fees, documentation, and legal formalities.

Disclosure Obligations: Although private, some details (like financial statements) must be submitted to regulatory authorities.

1. Limited Liability:

Protects personal assets from being seized to repay company debts.

In case of financial losses or legal claims, the shareholders' liability is limited to their unpaid share capital.

2. Separate Legal Entity

The company can:

Own assets, property, and bank accounts.

Sue or be sued independently of its owners.

Operate and exist regardless of changes in ownership or management.

3. Fundraising and Investment Opportunities:

Easier to raise capital through equity investment by issuing shares to private investors.

Banks and financial institutions are more likely to lend to a Private Limited Company due to its structured governance and transparency.

Startups often prefer this structure to attract venture capitalists and angel investors.

4. Professional Image and Credibility:

A Private Limited Company appears more professional and credible than a sole proprietorship or partnership.

Clients, suppliers, and investors often prefer dealing with a company due to its formal legal structure and accountability.

5. Business Continuity:

Perpetual succession ensures that the business continues even if shareholders or directors change, offering stability and long-term operational capability.

6. Better Tax Planning:

Private Limited Companies may enjoy tax benefits, such as deductions on business expenses, lower corporate tax rates, and exemptions available under tax laws.

Directors and shareholders can also receive tax-efficient remuneration or dividends.

7. Ownership and Control

Despite allowing multiple shareholders, ownership can be retained within a trusted group (e.g., family or close associates) due to restrictions on share transfers.

The board of directors manages the company, while shareholders retain strategic control.