Why opt for a Pvt company instead of proprietorship firm

Why opt for a Pvt company instead of proprietorship firm

Why opt for a Pvt company instead of proprietorship firm 


When a person develops an idea to start a business, the first thought he has is to gain the Maximum Return with the minimum cost. Initially in India people used to do the business alone but that resulted in less profit as an investment and whole liability will be on a single person. With the change in time, people are moving to another option where they can have limited liability with a higher return.

Why the private limited company is beneficial than a proprietorship


  1. Private Company has more funds than proprietorship as more people can invest in the Company.

  2. Owners have limited liability in the Business

  3. A private company is a separate legal entity than its owner

  4. Company Statement is more trustworthy for getting loans from banks.

  5. Owners have the minimum risk as investment made by then is treated as a liability of the company and that will be repaid by the company if any bankruptcy happens.

  6. Owners can get Interested in their capital as the rate defined in Companies Act, 2013.

  7. Private Company has minimum litigation as various exemptions are provided in the Companies Act, 2013 to a private limited Company.


Disadvantage of proprietorship


  1. Unlimited Liability

  2. Shortage of funds

  3. Unorganized form of business

  4. Difficult to find investors.

  5. The income of the business is taxed in the hands of the owner without claiming any exemption.




As per the Sec. 2(68) of Companies Act, 2013 a private company a which by its articles],—

(i) restricts the right to transfer its shares;

(ii) Except in the case of One Person Company, limits the number of its members to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:


What are the steps of incorporation of the private Company?


  1. Availability of Name

The organization's name must end with 'Private Limited. The name can be reserved through RUN FORM earlier but with effect from 15th February 2020, it can be reserved only with the Spice + Form as motioned in the MCA recent update.

  1. Preparation of Memorandum of association and article of association

MOA expresses the field where the organization will work together, targets of the organization, just as the kind of business the organization intends to attempt. It is additionally partitioned into five conditions.

Articles of Association is fundamentally a record that states rules which the inside administration of the organization will follow. The article makes an agreement between the organization and its individuals. The article makes reference to the rights, obligations, and liabilities of the individuals. It is similarly official on all the individuals from the organization.

  1. Filing of form

After preparing the required document as per the Rules (chapter II The Companies (Incorporation) Rules, 2014 Company needs to File a Spice form along with MOA and AOA with the required attachment.

As per the MCA update w. e. f 15th February 2020 Spice form will be replaced by Spice + form 

  1. Certificate of incorporation

After submission of duly certified form with Registrar of Companies, the registrar will check the Form and if found suitable can issue the Certificate of Incorporation.




  1. Proposed Four names.

  2. Mandatory documents

  1. Pan card

  2. ID proof- Driving license/ Voter ID/Passport

  3. Address proof- bank statement

  4. Electricity bill not older more than 2 months

  5. Rent agreement if rented premises.

  6. Mail ID, Contact No, and DSC of the Proposed Director and Members.


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