Question

Subeer, a tech-entrepreneur and his friend Harish, an investment banker planned to start a business organization where they can exercise control over the business, manage it with limited liability and that its continuity is not affected by entry or exit of members. They intend to maintain the confidentiality of the business operations as well.Identify the form of business organization best suited for them giving reasons for the choice?

Answer 1

Private Company Reasons: 

a. Number of directors: Only two directors are required in case of a private company whereas a public company requires minimum three directors. 

b. Issue of prospectus: A private company does not invite the public to subscribe to its share capital. Hence, it doesn’t issue a prospectus. 

c. Allotment of shares: Shares of a private company can easily be allotted without receiving a minimum subscription. 

d. The control: and management is generally in the hands of the owners of capital which is not so in a public company. 

e. A non-member: cannot inspect the copies of the P&L A/C filed with the Registrar