The restructuring of a company is critical, as this is the step to be taken to start a business. You have to understand that the taxes, compliance procedures, and eligibility depends on the type of organization’s structure you would select. Thus, this is among the most important decisions any entrepreneur should make. Understand well the different forms of business registrations.
Learn more about Company Registration in Trichy, before reading types of company registration.
Different Types of Companies
There are different types of categories according to forms and category of corporations or entities established in India under the corporations Act of 2013.
Sl NO | Criteria | Types of Companies |
1. | Based on Size | Micro Companies Small Companies Medium Companies |
2. | Based on the number of members | One person company Private companies Public companies |
3. | Basis of control | Holding Companies Subsidiary Companies Associate Companies |
4. | Based on the liability | Limited by Shares or by Guarantee Unlimited |
5. | Based on the capital access | Listed companies Un-listed companies |
Types of Company Registration
Registration of company is the main step that makes the business owners create or incorporate the company. The business owner requires putting the type of company according to his or her activities as there are lots of company types in India. The Acts of Companies of 2013 provides the following seven different types of firm formation structures to create in India:
- Private Limited Company
- Public Limited Company
- Partnerships
- LLP Registration
- One Person Company
- Sole Proprietorship
- Section 8 Company
Private Limited Company
Private limited company serves as close-end organizations for businesses. The liability among them in this company is shared among shareholders in order to safeguard their personal interests. In such kinds of businesses, the total capital comprises all the shares each member of the company has. Moreover, members’ properties and estate are considered separated, which adds to prudence and protection. Such company’s shares may not be freely transferred or exchanged.
The requirements which govern the qualification for this PVT Limited registration as above are as follows as per the Companies Act:
- Minimum of two and maximum of fifteen directors
- At least one of the directors must be an Indian resident
- Minimum of two and maximum of 200 shareholders or members
- Additionally, an authorized capital fee amounting to at least ₹1 lakh
- Must have a registered office address within India.
Types of Private Companies
- Limited by shares: In these private limited companies, the liability of each member is limited to the nominal value of their shares.
- Limited by guarantee: In this case, liability of the members is limited to the amount that they undertake to contribute or pay upon the winding up of the company.
Public Limited Company
A public limited company is a kind of company whose shares can be bought by everyone. There is no limit on the number of shares that may be purchased or sold in these company companies. The shareholders thus become co-owners of the business, with shares being floated by virtue of its being listed on a stock exchange. The first thing that such companies have to fulfil is that they must be registered with the ROC. In this regard, conversion from a private limited to a public limited company will occur.
The following are the minimum requirements for forming a public limited company under the Companies Act, 2013:
- Minimum of three directors
- At least one of the directors must be an Indian resident
- Minimum of seven shareholders with no cap on the maximum limit
- An authorized capital fee amounting to at least ₹5 lakhs
- Must have a registered office address within India.
Partnership Firm
Partnerships are run between partners who’ve made a decision about their responsibilities regarding profit sharing from the partnership. The verbal agreement states, terms of the roles, duties, authority, and number of shares held. This is governed by the 1932 Indian Partnership Act.
A partnership firm is a partnership deed that legalized and registered a partnership deed. It can either run with or without a license. However, what partnerships do, most likely, register because it gives them more rights and benefits. To set a partnership, one must meet some conditions:
- Minimum of two and maximum of fewer than ten partners
- Must have a registered office address in India
- Must have a registered partnership deed signed by all partners.
Limited Liability Partnership
This limited liability partnership, often called LLP, is a fairly new type of business structure in India. It possesses a unique legal status that helps an entrepreneur separate his personal and corporate assets and provide the person with insurance against liability. The liability of each partner in an LLP goes to the extent such partner has share capital.
The following are the eligibility requirements for incorporation of LLP:
- Minimum authorized capital amounting is upto ₹1 lakh
- At least one of the designated partners must be an Indian resident
- Minimum of two partners and no cap on the maximum number
- At least one individual partner, if the rest are corporate bodies
- No requirement for shared capital since each partner must have an agreed contribution.
One Person Company
One-person companies are the latest of foreign company forms permitted in India and perfectly suit all species of enterprises-small businesses that include agriculture. It is the best option for an entrepreneur who wants to personally run his business. With the unique legal status of the OPC, business owners enjoy the benefits of liability protection without forming partnerships.
An OPC is very easy to incorporate and even easier to manage since it binds only one person; in fact, it acts largely as a combination of the private limited and sole proprietorship business enterprise models. The requirements for registering as an OPC are:
- Minimum authorized capital amounting to at least ₹1 lakh
- The individual must be a natural Indian citizen and resident
- The promoter must appoint a nominee during the incorporation
- Financial businesses cannot incorporate as an OPC.
Sole Proprietorship
A sole proprietorship has only one individual operating the business. The owner and the business are one and the same entity and are fully liable to all gains or losses. Being the individuals whose names appear on the registration, they will also appear on tax returns and accounting records that can give infinite liability of the sole proprietors for the business.
But it is actually the easiest business set up and to manage. The requirements in investments and compliance are also very low; thus, this is the preferred case for very small business owners and owners of home businesses that have supermarket business plans.
Section 8 Company
Section 8 companies are also termed non-profit organizations, and they function for the purpose of philanthropic activities. Their prime objectives include promotion of arts, sciences, literature, and education; alleviation of poverty, and conservation of the environment. Further, members have no holding of dividends for themselves, and all their residual earnings go to achieving these goals.
The following requirements must be fulfilled in order to register a Section 8 company:
- Minimum of two shareholders
- A minimum of two directors and they can be shareholders as well
- At least one of the directors must be an Indian resident
- No minimum capital requirement
- Must have a registered office address in India.
Conclusion
For any entrepreneur, selecting the appropriate business structure is a fundamental choice. It affects your company’s tax responsibilities, compliance needs, and operational flexibility in addition to determining its legal identity. Private Limited Companies, Public Limited Companies, Partnerships, Limited Liability Partnerships, One Person Companies, Sole Proprietors, and Section 8 Companies are among the various forms of company registration that provide distinct advantages suited to particular business requirements. To choose the best structure, entrepreneurs should carefully consider their long-term vision, resources, and business goals. You may lay the groundwork for a profitable and legal company path with careful planning.
