Characteristics, advantages, and disadvantages of a private limited company

FEATURES OR CHARACTERISTICS OF PRIVATE LIMITED COMPANY

  • Membership is from 2 shareholders and no maximum
  • shareholders have limited liability




  • shareholders are the owners of the company
  • It is registered with the registrar of companies
  • Capital is raised through the sales of shares
  • It holds annual general meeting
  • It is controlled by the board of Directors elected by fellow shares holders at the annual general meeting
  • There is continuity of existence even after the death of important shareholders
  • It has a separate legal status
  • The letter Ltd (Limited) is written after the company name
  • Shares are not sold at stock exchange
  • Shares are not transferrable
  • financial records are not filed with the registrar of companies
  • It can start trading as soon as it is incorporated




ADVANTAGES OF PRIVATE LIMITED COMPANY

  • All shareholders have limited liability
  • There is continuity of existence even after the death of important shareholder
  • It has a separate legal status from the promoters
  • it has more capital because of more shareholders and
  • It has more borrowing capacity compared to partnership
  • Financial accounts are kept private

DISADVANTAGES OF PRIVATE LIMITED COMPANIES




  • Shares are not sold to the public hence limits the amount of capital raised
  • Shares are not transferable
  • There are more formalities in running a company such as holding annual general meeting are compared to partnership
  • There are more formalities in forming a company as compared to partnership such as formulating a memorandum of Association and article of association
  • Share are not sold at stock exchange
  • It is more expensive to set up as compared to a sole trader




  • It is not flexible as compared to a sole trader as it is governed by two documents drawn up when it is registered as a company