Benefits of Company Incorporation 

1.Helps to generate capital 

Capital is the money needed to produce goods and services. A company has two forms of obtaining capital: equity, which means raising funds through the public and debt referring to bank loans or other forms of credit. When a company is incorporated, it is considered more reliable; hence it shall be easy to obtain capital.

1.Separate entity

A company is a separate legal entity to the following stakeholders:

• Promoters: People who initiated the company setup
• Directors: People who control the company and manage its business
• Shareholders: People who own the company

3.Limited liability

Members are legally bound to pay only to the extent of their undischarged liability. In case of a company limited by shares, it is limited to the amount unpaid on their shares. While in a company limited by guarantee the liability shall be only the amount the members have agreed to guarantee. For example, a person has purchased 10 shares of Rs 100 each. His maximum liability shall be INR 1000 only.

4. Attractive to Investors

Private Limited Companies are attractive for investors owing to its high potential for growth and historical records of success in the Indian market. Further, a Private Limited company is a popular name in the domestic as well as Indian market, and sounds more convincing to entrepreneurs looking forward to making it big in their respective industries

Conclusion

Startups often face multiple dilemmas while deciding whether to incorporate their businesses or not. This is primarily due to the hefty cost involved in the process of incorporation and related compliances, which startups struggle to afford in the initial stages of their business. However, they often fail to realize that the disadvantages and penalties for not getting incorporated, far exceed the cost of incorporation. As far as the legal status is concerned, startups are anyway permitted to get incorporated as a private limited company, an LLP, or a partnership firm only. Out of these, a private limited company is the most viable option, especially when compared to the other two. The reasons for the same have been discussed above to provide a thorough understanding of the benefits of private limited companies in India.