What are the Advantages of a Private Company?

A private limited company enjoys the following advantages:

1. Ease of formation:

A private company can be formed by two persons only. It can start its business immediately after incorporation and is not required to wait for the certificate of com­mencement of business.

2. Greater flexibility:

A private company is required to perform lesser legal formalities as compared to a public company. It enjoys special exemptions and privileges under the company law. Therefore, there is greater elasticity of operations in a private company.

3. Quick decisions:

In a private company there are a lesser number of people to be consulted. Family members, relatives and close friends form a private company. They can take prompt decisions.

4. Secrecy:

A private company is not required to publish its accounts or file several docu­ments. Therefore, it is in a better position than a public company to maintain business secrets.

5. Continuity of policy:

The same persons continue to manage the affairs of a private company. Relations between them are close and continuity of policy can be maintained.

6. Limited liability:

The liability of members in a private company is limited.

7. Personal touch:

There is greater personal touch with employees and customers in a private company. There is also greater incentive to work hard and take initiative in the manage­ment of business due to little separation between ownership and management.