The organization structure is one of those important factors that determine what type of tax one has to pay or compliances one has to follow. Henceforth, one of the most crucial decisions business owners can make is determining what type of business registration is best for them. Furthermore, our legal framework empowers different types of companies to exist under various types of company registration. In this blog, we would explore various types of company registration available in our country.
What are the Various Types of Business Models?
In the purview of Companies Act, 2013 here is the tabular representation of a different classification of business entities exists in India;
|Sl No||Criteria on basis of:||Form of Companies|
|1||Size||Small companies Other companies|
|2||Control||Holding companies Subsidiary companies Associate companies|
|3||Number of members||One person company Private companies Public companies|
|4||Access to capital||Listed companies Un-listed companies|
|5||Liability||Limited by Shares or by Guarantee Unlimited|
Read our article:How to validate the Company Registration Number?
Deep Analysis on Types of Company Registration
Registering a company is the first and foremost process by which entrepreneurs incorporate their company. Since different company types exist in India, the business owner has to make sure that they choose the right type of business model that fits their operations. In our country, the Companies Act, 2013 has underpinned some directions for various types of company registration. The section below discusses the different business types in India.
Public Limited Company
A Public Limited Company is one whose shares can be traded in the public domain. In such a business type, there is no limitation on the number of shares that can be traded or sold. Since the share of the public limited company is listed on the Stock Exchange, they can be traded without any restriction, making the shareholders a part of the company.
Such companies are required to acquire the registration certificate from the ROC before starting the business activities. Now to avail registration for such a business type, the public limited company is required to comply with the given conditions.
- Minimum of 3 directors are required to manage the public limited company.
- One of the three directors should be an Indian national.
- Minimum of 7 shareholders required to set up a publicly held organization.
- Moreover, an authorized capital fee amounting to at least INR 5 Lakhs
- Should have a registered office address in the Indian territory.
Private Limited Company
Private Limited Companies are best suited to those entities who wish to work like a privately held organization. The liability in a privately held company is not imposed on the specific member; instead, it is distributed among the shareholders. This allows the members to safeguard their assets against any losses that occur in the company.
The total capital of a private limited company is equivalent to the total number of shares owned by each member. The business and personal assets of the members are deemed separates, rendering better security & protection. It is one of the most popular types of company registration available in the country right now. The shares of such a company cannot be exposed or transferred to the general public. The Companies Act, 2013 has laid down the following criteria to set up a privately held organization;
- The minimum of 2 & a maximum of 15 directors can exist in a private limited company.
- At least one of the directors should be an Indian national.
- Minimum of 2 and a maximum of 200 shareholders can exist in the private limited company.
- Additionally, an authorized capital fee amounting to at least INR 1 Lakh
- Must have a registered place of business in the country.
Types of Private Companies
There are different types of Private Companies, which are as follows:-
Limited by Shares
In such type of companies, the liability of the shareholders is limited to the extent of their shareholding capacity.
Limited by Guarantee
In this case, the liability of the shareholders would be equivalent to their contribution which they promised to make if the company goes bankrupt.
In such a business type, the liability of the member is unlimited i.e. not subjected to any limitation whatsoever. This means, in case of any financial crisis, the member has to compensate for the loss with their private assets.
The Partnerships is other popular types of company registration in India. In such business type, the partners are accountable for handling the day to day operations as per the writ contract. Henceforth, the roles, duties, functions, and number of shares are enclosed in the partnership deed. Such businesses work under the canopy of the Indian Partnership Act, 1932. Partnership companies can operate without a license provided they possess a valid & registered partnership deed. To be eligible for such a business type, the partnership firm should comply with the given conditions:
- Partnership firm can contain a minimum of 2 and a maximum of 10 partners.
- They must have an authorized office address in the Indian territory.
- The partnership deed must be signed by all the involved partners,
Limited Liability Partnership
Limited liability Partnership is also known as LLP, is the new types of company registration in India. Furthermore, it holds the independent legal identity, helping differentiate between business & personal assets, and conferring the entrepreneurs limited liability protection.
In LLP based company, the liability of every partner is depending on the number of share capital, ensuring more security than a Sole Proprietorship. Now, to acquire the registration for such business type, the LLP should comply with the given conditions:
- Must have a minimum share capital of one lakh rupees.
- At least one of the partners should be an Indian national.
- A minimum of two partners are required to set up such a business type. There is no cap on the maximum limit.
- At least one partner should be an individual if the remaining partners are corporate bodies.
- No limitation of the procurement of share capital.
One Person Company
One person company model is best suited to small entities. Since this business type is a part of the Companies Act 2013, it empowers the business owners who intend to carry out the business activities single-handedly. One Person Company has an independent legal status and it allows it to have full control over the business activities, assets, and liability. To avail registration of such a business type, the OPC should meet the given conditions without exception:-
- Must have a minimum share capital of one lakh rupees.
- The business owner should be an Indian.
- Appointment of the nominee by the promoters is mandatory for the incorporation.
- One person company model is not available to the institution engaged in financial lending.
- In case if the paid-up capital exceeds INR 50 lakhs and the annual turnover is more than two crores then the entity should convert to a privately held organization.
Section 8 Company
Section 8 company is popularly regarded as a Non-Profit Organization. Section 8 companies mainly work toward human welfares. Profit granted to such companies cannot be used for personal benefits; instead, it is used to achieve the organizational goals. To become eligible for this type of business model, the Section-8 company should comply with the given conditions;
- Minimum of 2 shareholders.
- Minimum two directors are required to set Section 8 Company.
- At least of the directors should be an Indian national.
- No limitation imposed on the capital requirement.
- Company should have a registered business address in the country.
This is perhaps the most popular business model in India as it allows individuals to run their businesses independently. However, in such a business model, the owner and the company are treated as a single entity, making them solely accountable for profit as well as losses.
Furthermore, since the registration carries the owner’s name, accounting reports and tax filings will also carry the owner’s name, which eventually leads to unlimited liability. Consequently, Sole proprietorship does not have an independent business registration process.
The growth and prosperity of your investment will be depend on what types of company registration you choose. Selecting the right business model alsoensure the prolong existence in the given market. One must be aware of the ups and downs of every business model before selecting them.
Apart from profit and loss, there are other factors as well which contributed towards the selection of a business model. As per the latest trend, private company registration and sole proprietorship stand out among them all due to their countless benefits.In case if you need some help regarding registration procedures or paperwork, we are here to help you out.
Read our article:How to Avail a Company Registration Certificate?