Company Registration

Types of Company Registration in India: A Comprehensive Outlook

calendar17 Nov, 2022
timeReading Time: 3 Minutes
Types of Company Registration in India: A Comprehensive Outlook

Once you have decided to initiate your business journey, the next important step is to decide which type of company registration is suitable for your business. Today, aspiring entrepreneurs have ample options to choose from. Legal structures like private limited companies and One Person Companies have become the most popular in the business domain. This article pens down the types of company registration in India accessible to businesses nationwide.

List of Popular Types of Company Registration in India

Here is the list of widely-used types of Company Registration in India. Businesses can choose one of these business models based on the scope of operation, liability fencing, risk allocation, and growth threshold.

Private Limited Company (Suitable For Small Businesses)

A Private Limited Company is among the most popular business structures in India. This business structure adheres to various benefits such as limited liability, organized managerial hierarchy, least compliance on so on. The Companies Act, 2013 governs the entire legal facets of this business structure, be it handling board meetings, changing directors, and venturing into new business. The applicant must visit the Ministry of Corporate Affairs (MCA) to complete the incorporation formalities for this legal structure.

What requires to be incorporated as a private limited company?

  • At least 2 directors
  • Registered office in India
  • Drafting of Memorandum of Association and Article of Association
  • Digital signatures certificate of the directors

One-Person Company (Suitable For Small Businesses)

The concept of One Person Company (OPC) turned into reality in the year 2013. By virtue of rights conferred under section 2(62) of the Companies Act, 2013, OPC allows for one person to be a director as well as the owner of the company. Henceforth, OPC is a suitable business structure for entrepreneurs looking to have smaller management alongside uncompromised control and profit.

What requires to be incorporated as an OPC?

  • At least one director
  • Registered office in India
  • Authorized share capital as per governing legislation
  • Digital signature certificate of the directors

Public Limited Company (Suitable For Bigger Companies)

Switching to a structure like the public limited company is a boon for the bigger organization since it renders apt leverages for growth. However, the compliance for this business structure is on the higher side. Companies Act, 2013 governs the legalities of this business structure.

What requires to be incorporated as a Public Limited Company?

  • At least 3 directors
  • Minimum 7 shareholders
  • Registered office in India
  • Drafting of MoA and AoA
  • Minimum Paid-up capital- 5 lakhs
  • Authorized share capital as per governing legislation
  • Digital signature certificate of the directors

Choosing this type of company registration can let founders experience various benefits such as increased growth opportunities, releasing shares publicly, better management, and so on.

Partnership Firm (Suitable For Founders Acting As Partners)

A partnership firm is a widely-used type of company registration in India. It is preferred by those who wish to run the business via a partnership model. It falls under the ambit of the Partnership Act 1932. Drafting a partnership deed is a fundamental legal requirement to bring this business structure into effect. The deed further undergoes verification and authentication conducted by the Register of Firms (RoF). The deed contains rights, obligations, profit margin, and so on for the serving partners. Partners must enclose their signature on the deed before or after approaching RoF for validation.

Prerequisite for establishing a partnership firm

  • Minimum of two partners
  • Drafting of Partnership on non-judicial stamp papers
  • The prescribed application form (duly filled)
  • Arrangement of documents like the firm’s PAN and partners’ evidentiary dossiers
  • Stamp duty (State-wise)

Limited Liability Partnership (LLP) (suitable for partners seeking limited liability)

LLP comes under the canopy of the LLP Act 2008[1]. Unlike partnership firms, LLPs adhere to improved stability on the legal front. Also, it doesn’t pose more risk to the serving partners since it endorses the limited-liability concept. The LLP deed is required to be drafted by partners as it is a mandate for incorporation. This type of company registration keeps partners atop legal hassles that could turn into disputes. Here’s what you would be required to complete the LLP incorporation process.

  • LLP deed
  • Documents such as partners’ PAN and adhaar, firm address, and so on.
  • Duly filled Filip form available on MCA portal

Proprietorship Firm (suitable for one person seeking uncompromised control over the business)

Proprietorship is one of the popular types of company registration in India since it doesn’t attract countless norms, unlike other business models. However, such a business structure attracts a risk of being liquidated in a pressing fiscal situation. it‘s because the owner and the business under this legal structure are treated as a single entity. There is no legal distinction for each of them whatsoever, making this business model highly unstable and legally unviable.

Conclusion

That’s all about the list of widely-used types of company registration in India. Although each of them renders ample benefits to the business owner, they adhere to some fundamental limitations. Therefore, knowing what model is suitable for your requirement is the best way to pick the ideal types of company registration. Also, do not forget to consider other crucial factors like scope of operation, management hierarchy, and compliances before initiating the proceeding for business registration.

Read Our Article:Why Company Registration is important for small businesses?

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