In India, private limited company is the most popular way to create a corporate legal entity. It comes under Companies Act, 2013 and the Companies Incorporation Rules, 2014. Minimum two directors and share holders required to register a private limited company. Same person can be a shareholder and a director and a corporate legal entity can only be a shareholder. Foreigners and NRIs can be directors and share holders with FDI.
Many times startups need to borrow money and take things on credit. In case of normal Partnerships, Partners personal savings and property would be at risk incase business is not able to repay its loans. In a private limited company, only investment in business is lost, personal assets of the directors are safe.
Private limited company is popular and well known business structure. Corporate Customers, Vendors and Govt. Agencies prefer to deal with Private Limited Company instead of proprietorship or normal partnerships.
Pvt. Ltd. company enjoys wide options to raise funds through bank loans, Angel Investors, Venture Capitalists, in comparison to LLPs and OPCs.
Investors love to invest in Private Limited companies as it is well structured and less strings attached. Most important it is very easy to exit from a private limited company.
For startups putting together a team and keeping them for long time is a challenge, due to confidence attached to private limited structure, it is easy to hire people as well motivate them with corporate designations and stock options.
Private Ltd. is easy to sell, very less documentation and cost is involved in selling a Pvt. Ltd. company.