Characteristics and objective of Private Limited Company:
Characteristics of a Private Limited Company:
1. Limited Liability: The owners or shareholders of a private limited company have limited liability, which means their personal assets are not at risk if the company incurs any debts or liabilities.
2. Limited Number of Shareholders: A private limited company cannot have more than a certain number of shareholders, usually capped at 50.
3. Restricted Transferability of Shares: Shares in a private limited company cannot be freely transferred or traded on the stock market. They can only be transferred with the consent of other shareholders.
4. Separate Legal Entity: A private limited company is a separate legal entity from its owners or shareholders. It can enter into contracts, own assets, and operate independently of its owners.
5. Perpetual Existence: A private limited company has perpetual existence, meaning its life is not dependent on the life of its owners. It can continue to exist even if its shareholders change or die.
6. Privacy: As the name suggests, a private limited company is more private compared to a public limited company. It is not required to disclose its financials or other important information to the public.
Objectives of a Private Limited Company:
1. Profit Maximization: The primary objective of a private limited company is to maximize its profits and ensure the financial success of the business.
2. Growth and Expansion: A private limited company aims to grow and expand its operations, market share, and customer base to increase its profitability and market presence.
3. Providing Quality Products or Services: The objective of a private limited company is to provide high-quality products or services to meet the needs and expectations of its customers.
4. Building a Strong Reputation: A private limited company aims to build a strong reputation in the market by maintaining ethical business practices, meeting legal obligations, and ensuring customer satisfaction.
5. Wealth Creation: Another objective is to generate wealth and create value for its owners or shareholders through dividends, increase in share value, or capital appreciation.
6. Employment Generation: Private limited companies aim to create employment opportunities by hiring and retaining talented individuals, thereby contributing to economic growth and development.