The Company exists as a separate legal entity as from its members. The liability of the company is different as from its members of a company. Limited liability is where a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership. For example, if you invested 5lakhs in a Pvt Ltd company, your liability is limited to Rs. 5lakhs only even if the company has greater liability.
Easy transfer of ownership
It is easier to buy and sell shares in a Private Limited company than a proprietorship firm or partnership firm. The shares and other interest of any shareholder in the Company can be transferred to a new or existing person in the manner so provided by the Articles of such company. It is relatively easy to join or exit the membership of the Company. Also, one can sell a portion of the shares or all with a few paper works.
Easy to get external fund (from Banks and VCs)
Raising money as a small business and a sole proprietorship or partnership can be difficult (not impossible though). Banks and other institutional investors tend to rely more on registered companies than firms. So, a company in good standing has more change of obtaining external capital.
Perpetual succession definition is – the capacity of a corporation to have continuous enjoyment of its property so long as it is legally in existence. This means even if the shareholder dies, the company keeps on running as it has a separate legal entity than its shareholders. Also, in Nepal, you don’t need to renew the company on a regular basis like Firms or Industries.
Companies of Nepal need to follow companies Act 2063 and fulfil various requirements of the act. This makes the governance strong and hence increase confidence on the customers, suppliers, lenders and other stockholders.