Private Limited Company – What You Need To Know
What Makes a Company “Private” and “Limited”?
A private limited company (PLC) is a business entity that is, as the name implies, privately held. Private limited companies usually consist of small and medium businesses. The owner of such an entity would limit his or her liability to their shares, and limits the number of shareholders in a company to a maximum of 50. Shareholders are also restricted from publicly trading shares.
In addition, a private limited company is:
- A legal entity in its own right and the company’s finances are a separate thing altogether from the owner’s finances.
- One of the most suitable structures for both profit and non-profit making business entities.
- A company has an indefinite lifespan, and will be able to run as long as there is somebody to run it.
How to Set Up a PLC
To establish a PLC, investors would need to complete the following steps:
- Select a suitable and unique name for the company
- Acquire a registered company address for the business
- Appoint at least one director
- Appoint at least one shareholder to manage the details of the company shares
Who Can Establish a PLC?
If you have the means to do it, you can establish a PLC by yourself and own 100% of the shares, or divide the shares among other shareholders in your company if you have more shareholders.
Owners of private limited companies are known and shareholders, and each of these shareholders would hold a certain number of shares in the business. To become a shareholder, one must purchase one or more shares which are issued by the company. Each share purchased would represent an equal percentage of the business. Basically, the more shares you hold, the bigger the percentage of the business that you own.
The one in charge of operations and management is known as a director(s). Company law ordinarily requires to have at least one director, which in a lot of cases usually ends up being the owner of the company themselves.
Why Having a PLC is Beneficial?
Running a business as a PLC would offer you the advantages below:
- A professional status, as private limited companies are usually seen as a more professional body compared to other business entities like the sole trader for example.
- Owners have a more tax efficient income within the legal limitations.
- You are protected from personal liability. Personal assets will not be at risk with this company option if the business fails. The liability of the shareholders is only limited to the amount (if any) unpaid shares which are held by them.
- Doing business with other companies is also much easier when you’re a registered and incorporated company under PLC because of the level of professionalism that goes with this type of business entity.
Find out more on Setting up a company in Malaysia.