Over the past decade, there has been a huge spike in the number of entrepreneurs and entrepreneurial businesses in Bangladesh. As a result, there is now a large demand for structured and legally recognized business establishments.
There are multiple business structures out there, such as Private Limited Companies (PLC), Sole Proprietorships, and Partnerships. Among them, the Private Limited Company is a popular choice for entrepreneurs in Bangladesh. In the following blog, we delve into why it is a preferred option, highlighting all the benefits.
Understanding Private Limited Companies in Bangladesh
A Private Limited Company in Bangladesh is a business structure that has a separate legal identity from its owners. It also has other key characteristics, such as:
- It offers limited liability to its shareholders. This means that they are only liable for the amount they have invested in their shares.
- The company is an individual legal figure and can own assets, acquire debts, and set up contracts completely independent of the shareholders.
- There is a restricted share transfer where the shares cannot be transferred freely to the public. This ensures that only a selected group has control over them.
- A PLC has a set minimum and maximum number of shareholders. It requires at least two and can have a maximum number of fifty shareholders.
Role of the Registrar of Joint Stock Companies and Firms (RJSC)
The Registrar of Joint Stock Companies and Firms (RJSC) is the main authoritative figure that handles all the company registration and regulation in Bangladesh. So, entrepreneurs need to go to the RJSC for the following requirements:
- Name Clearance: They need to make sure their company name is unique and permissible.
- Incorporation: Entrepreneurs must submit important documents such as the Memorandum and Articles of Association for company registration.
- Filing Returns: This includes regular compliance filings, which consist of financial statements and annual returns.
- Incorporation Certification: Once everything has been verified, the RJSC will confirm the company’s legal existence through the Certificate of Incorporation.
Key Advantages of Private Limited Companies
As an entrepreneur, it is important for you to choose the right business structure. This is to ensure your company’s growth, credibility, and risk management. Here are some of the key advantages that make private limited companies a preferred choice:
1. Limited Liability Protection
One of the biggest advantages of a PLC is the limited liability protection it provides. Due to this, the shareholders’ personal assets stay protected. It means that they are only liable for the company’s debts for the amount they invested only. This protection encourages investment and risk-taking among shareholders due to having peace of mind.
2. Ease of Raising Capital
Another advantage of PLCs is the ease with which they can raise capital. They can easily do it through the distribution of shares. This flexibility allows companies to attract investors and get funding very effectively, unlike sole proprietorships or partnerships. Moreover, the overall structure and nature of a PLC add to its appeal for banks and other financial institutions for loans and credit facilities.
3. Credibility and Trustworthiness
Additionally, companies that work as a PLC have a boosted reputation in the market. It is because clients, suppliers, and potential partners view PLCs as stable and reliable entity. This is due to the overall regulated structure and compliance requirements. So, the overall credibility will offer a lot of business opportunities and collaborations for companies.
4. Perpetual Succession
Another huge benefit of a PLC is its continuous succession state. This means that regardless of any ownership changes or shareholder problems, the company won’t be affected. So, it will continue to operate, ensuring the long-term stability of the business.
Regulatory and Tax Benefits
However, among all the benefits of a private limited company in Bangladesh, the biggest ones are the regulatory and tax advantages. From easier access to essential licenses, government tenders, and tax schemes, a PLC has access to a wide range of benefits like:
Tax Rates and Incentives for Private Limited Companies
The Bangladeshi government provides a lot of tax incentives that promote business growth. For example, some sectors benefit from reduced corporate tax rates. Moreover, some companies can claim credits from paid foreign taxes based on international agreements.
Access to Trade Licenses, VAT Registration, and Import/Export Facilities
A PLC can also easily get essential licenses and registrations. This includes trade licenses and VAT registration. Due to this, companies can maintain smooth operations, particularly those involved in import and export activities. This will allow such businesses to utilize international trade opportunities.
Final Words
All in all, in today’s competitive business world, you need to choose the right company structure to achieve long-term success. As a result, for entrepreneurs in Bangladesh, the private limited company is the preferred choice as a smart and strategic move. This is because businesses with such structure have access to benefits such as limited liability, more funding, and tax advantages. So, it should be no surprise that with time, more and more startups and growing businesses are choosing private limited companies.
