As per Lawkidunya, a private limited company is a company that can either be limited by shares or by guarantee. Private company limited by shares:

Further explain, a Private Limited Company (Pvt Ltd) is a type of business entity that offers limited liability protection to its shareholders. Here are some key features and advantages of a Pvt Ltd company:

Characteristics of a Private Limited Company

1. Limited Liability: Shareholders have limited personal liability, protecting their personal assets from business debts.

2. Separate Legal Entity: A Pvt Ltd company is a separate legal entity from its shareholders, allowing it to own assets, enter contracts, and sue or be sued.

3. Private Ownership: Shares of a Pvt Ltd company cannot be publicly traded, and ownership is restricted to a limited number of shareholders.

4. Minimum and Maximum Shareholders: A Pvt Ltd company must have at least two shareholders and a maximum of fifty shareholders.

5. Minimum Paid-up Capital: The minimum paid-up capital for a Pvt Ltd company in Pakistan is PKR 100,000.

Advantages of a Private Limited Company

1. Limited Liability Protection: Shareholders’ personal assets are protected from business debts.

2. Tax Benefits: Pvt Ltd companies are taxed at a lower rate compared to other business entities.

3. Easy to Raise Capital: Pvt Ltd companies can raise capital by issuing shares to investors.

4. Perpetual Existence: A Pvt Ltd company has perpetual existence, meaning it continues to exist even if shareholders change or leave.

5. Professional Management: Pvt Ltd companies can hire professional managers to run the business, allowing shareholders to focus on strategic decision-making.

Disadvantages of Private Limited Company

1. Complexity: Forming and maintaining a Pvt Ltd company can be complex and time-consuming.

2. High Formation Costs: The cost of forming a Pvt Ltd company can be high, including registration fees, legal fees, and other expenses.

3. Regulatory Compliance: Pvt Ltd companies must comply with various regulatory requirements, including filing annual returns and maintaining accounting records.

4. Limited Transferability of Shares: Shares of a Pvt Ltd company can be difficult to transfer, as shareholders may have to agree to admit new shareholders.

Conclusion

A Private Limited Company (Pvt Ltd) is a popular business entity in Pakistan that offers limited liability protection, tax benefits, and professional management. While it has its disadvantages, a Pvt Ltd company can be an attractive option for businesses that want to balance liability protection with flexibility and tax benefits.