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Soumya Bajpai
| Updated: 25 Nov, 2020 | Category: Company Registration

Let’s Identify the Suitable Company Registration for an Entrepreneur!

Company Registration for an Entrepreneur

Company registration is a process which all business owners need to accomplish with. Before moving ahead it has to be identified a suitable company registration for an Entrepreneur. The Companies Act 2013 has listed different types of company registration which can be incorporated in India.

The first and foremost thing is to deal with before starting a business is to fulfil the legalities and to ensure the smooth running of the business entity. Company registration is the first step that grants a legal authorization to conduct business activities. It involves abiding a set of rules and regulations specified under the Companies Act.

Company Registration for an Entrepreneur

Since there are many types of company registration for an entrepreneur in India, an entrepreneur have to ensure they must choose a type of business that perfectly suits for their operations. The Companies Act, 2013 lays down guidelines for various types of company registration. Following are the types of company registration.

Types of Company Registration

Private Limited Company

Private Limited Companies are suitable for the businesses which require registration as the private entity. In this type of company registration, a group of shareholders distributes their liability amongst themselves. The total capital of this business types is a total of all shares held by each member of a private company.

Also, the business and personal assets of the members in a company are separate, which allows for better protection and security. The shares of private company must not be publicly traded or transferred. According to the Companies Act, 2013 the eligibility for this type of company registration for an entrepreneur has to fulfil the following criteria that are:-

  • Minimum of 2 directors and maximum of 15 directors
  • At least 1 of the directors as to be an Indian resident
  • Minimum of 2 and maximum of 200 shareholders
  • Must have the registered office address within India
  • No minimum capital requirement

Types of Private Companies

The following are the types of private companies that are as follows:

Limited by Shares: In this type of private limited companies, the liability of the members must be determined by the memorandum to amount unpaid on shares allotted to them.

Limited by Guarantee: In this type of private limited companies, the liability of the members is limited by a memorandum of the amount of members will contribute or guarantees to pay if the company goes bankrupt.

Unlimited: Moreover, this type of private companies does not have any limit on liability of its members. Therefore if company assets fail to pay off creditors, then members will have to use their private assets to clear debts, this increases the risk factor.

Public Limited Company

Public Limited Company is one whose shares can be purchased by members of the general public. In such company, there is not any limit on a number of shares which can be sold or traded. Since shares of the company are listed on Stock Exchange, they can be traded freely.

Such companies do not require obtaining a Certificate of Registration from before commencing the business activities. According to the Companies Act, 2013 the eligibility for this type of company registration for an entrepreneur has to fulfil the following criteria that are:-

  • Minimum of 3 directors
  • At least 1 of the Directors has to be an Indian resident
  • Minimum of 7 shareholders with no cap on the maximum limit
  • Must have the registered office address within India
  • No The minimum share capital is required

One Person Company

The newest entry in the types of company registration is OPC (One Person Company) which become operational in India since 2013. It has become a part of the Companies Act 2013, in order to help entrepreneurs who wanted to run the business on their own (single-handed).

The One Person Company has its separate legal status also, which give benefit to entrepreneurs. Furthermore, since there is an involvement of only one person, this type of company registration becomes easy to incorporate and regulate. Moreover, this essentially serves as the combination of Sole-Proprietorship business and Company model. According to the Companies Act, 2013[1] the eligibility for this type of company registration for an entrepreneur has to fulfil the following criteria that are:-

  • An individual has to be a natural Indian Citizen and resident
  • A promoter must appoint the nominee during incorporation
  • The financial businesses cannot incorporate as an OPC.
  • OPC can be converted into a Private Limited Company if turnover exceeds INR 2 crores.

Section 8 Company

Section 8 Company type of company registration can be done under a Non-Profit Organisation, as these companies mainly work for the charitable purposes. Moreover, it involves in promoting arts, literature, and science, education, protecting the environment and also caring for the needy. Also, all the profits generated by these types of companies must used to achieve their objectives, and the members do not take dividends for themselves. The eligibility for this type of company registration for an entrepreneur has to fulfil the following criteria that are:

  • Minimum of 2 shareholders
  • Minimum of 2 Directors and they can be shareholders as well
  • At least 1 of the Directors has to be an Indian resident
  • No minimum capital requirement
  • Must have the registered Office Address in India

Conclusion

The organisational structure that one will choose determines the taxes that have to be paid, compliances that need to follow, and the eligibility criteria that need to be fulfilled. Hence, it is one of the most vital decisions of which type of company registration for an entrepreneur will choose before starting a business. At Corpbiz we have provide all types of company registration that are mentioned above.

Read our article: Know the Procedures to Cancel Company Registration under Companies Act, 2013

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Soumya Bajpai

Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.

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