Benefits of company

Benefits of company

1. LIMITED LIABILITY: he company is a separate legal entity from that of its directors and shareholders. The company can own debts and assets on its own. Thus, it becomes imperative for startups or those businessmen who want to run a business with low risk, the best way to legalize business is to form a limited liability company. By forming a company, the risk that all the shareholders and other members carry is limited up to their shareholding in the company. It safeguards the personal assets of shareholders and directors. The other form of business such as partnership firms or sole proprietorships comprises unlimited risk. In case of any default or adversity in the business, the personal assets of the owner or partner get into trouble. This can be erased by carrying your business under a company format.
2. ETERNAL EXISTANCE: Company exists independently of its owners. The shareholders are the owners of the company and the directors are the individual who runs the management of the company and who are responsible for all the legal compliances to be followed by the company. For example person A runs a business in sole proprietorship and due to some unfortunate circumstances, he dies. In such a scenario, there is no future for his business as he used to run his business solely. Any situation like this can easily be avoided by running a business as a company. A company is an artificial person, the existence of which is separate from its owners.
3. UNLIMITED POTENTIAL OF EXPANSION: The format of the company is built in such a way under the company’s activities that it provides unlimited exposure to expand itself. By starting a business with a Limited Liability Company one can convert it into a public limited company for expansion and to get funds from the public at large. One can list the company with BSE/NSE also. Running a listed company is a huge achievement. You can make the public invest in your company which opens up the door to unlimited overseas opportunities also.
4. TAXATION ADVANTAGE: The previous budget presented by Hon FM has made the format of the company a tax-friendly one. The tax advantages provided to a company format are much more than that of the taxation of a partnership firm or sole proprietorship firm. Section 115BAA states that domestic companies have the option to pay tax at a rate of 22% (plus applicable surcharge and cess) from the FY 2019-20 (AY 2020-21) onwards if such domestic companies adhere to certain conditions specified. The company which is incorporated on or after 1 October 2019 and has commenced manufacturing on or before 31 March 2023 will be eligible to be taxed at the lower rate of 15 % (plus 10% surcharge and 4 % cess) subject to certain conditions. (Sec 115BAB).
5. EASY TRANSFER OF OWNERSHIP: As we have discussed that the company is an artificial judicial person separate from its owners, the owners of the company are its members and shareholders. Thus the ownership of the company is easily transferable just by transferring the shareholding. One can become the owner of a company by acquiring its shares. There is no lengthy procedure to transfer ownership under the companies act. There is a simple process following which one can easily transfer their shares at minimum cost.
6. INCREASE CREDIBILITY: Company format increases your creditworthiness among your customers and suppliers as it conveys permanence. It will ultimately lead to an increase in the revenue of the company. The company will be able to get finance from banks easily and smoothly. The company can establish itself as a brand in the market it operates.  Now a day, people want to associate themselves with an organization with a strong legal base and structure. In many businesses, there is a strong prerequisite of a particular business structure to get contracts and get tenders passed. Thus forming a company may definitely lead you towards pocketing some of the lucrative deals and contracts.
7. PROFESSIONAL MANAGEMENT: The company has to be handled in terms of the company’s act and its regulations. Many transactions of the company have their own responsibility of reporting to the concerned ROC. Thus it becomes a tremendously organized structure strictly administered by laws. The management of the company is bound to comply with various rules and regulations of law. No mismanagement can be tolerated under the format of the company. In case of any default or fraud, a company has to suffer penalties.