A private limited company is a legal business entity that operates under private ownership and limited liability. It is a type of company structure that restricts the number of shareholders and places limitations on the transferability of shares. This company structure is commonly used in the United Kingdom, India, and several other countries.
In a private limited company, the ownership is typically held by a small group of individuals, often family members or close associates, who are referred to as shareholders. These shareholders contribute capital to the company and receive a share of the company's profits in proportion to their ownership.
The liability of the shareholders in a private limited company is limited to the amount they have invested in the company. Their personal assets are protected, and they are not personally responsible for the company's debts or liabilities beyond their investment.
This type of company offers several advantages, including flexibility in operational decision-making and ease of management. A private limited company also provides a level of privacy, as it is not required to disclose its financial information to the public.
However, there are certain restrictions on a private limited company. It cannot offer its shares to the general public, and the transfer of shares is typically restricted, requiring the approval of existing shareholders. Additionally, the company must include the words "Private Limited" or "Ltd" in its name to indicate its legal structure.
