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What are the advantages and disadvantages in converting a proprietorship to a private limited company in India?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 asked

What are the advantages and disadvantages in converting a proprietorship to a private limited company in India?

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2 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Proprietorship is ideal only for very small business. Therefore after starting a private limited company you will have the following advantages: 1. Limited liability protection 2. More than one shareholder in the business 3. Separate legal entity 4. Ability to sell or transfer the business easily 5. Ability to easily get bank loan 6. Ability to get private equity funding / angel funding.

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Open uri20170510 32134 1ue0f38?1494421710 answered

Hi, Proprietorship is ideal if you are in the initial stage of business but if you want to do big and want to form some structures then a legal form is always required which is a Private Limited Company. Most importantly the liability is limited in pvt. ltd vs. unlimited for proprietorship. Secondly pvt ltd structure lends more credibility when seeking funding/loan etc. Following are the main advantages in Private limited: 1. Limited liability protection that means personal assets are safe. 2. You can introduce more than one person in the business i.e. More than one shareholder in the business 3. Separate legal entity 4. Borrowed capacity from Financial Institutions 5. Can issue Esops to Employees 6. Can easily get funding from banks, VCs/ HNIs / FIIs 7. Ability to sell or transfer the business easily 8. Ability to get private equity funding / angel funding. Regards

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