About
Sec. 2(20) of the Companies Act, 2013,states that the term “Company” means a company incorporated under this Act or under any previous company law. Registering your company is the first step of starting a business by which owners establish or incorporate their company.
A company comes into existence only after its registration under the Companies Act, 2013. There are various forms/constitutions of businesses available that one can register with. In this article we’ll give a brief about the same.
Types of Companies in India
Sole Proprietorship
Sole Proprietorship Registration does not require any formal registration as it is identified through alternate registrations, such as GST registration, Shop and Establishment registration etc . The proprietor has full control over business decisions, provided they are within legal parameters. All the investments for the business is done by him/her who bears all the losses and enjoys all the profits. This type of business structure is suitable for people who are starting a new business with comparatively less risks and minimum capital and do not want to be associated with others.
Public Limited Company
The term Public Limited Company is the wider form of Limited company. A Public Limited Company must have a minimum of three Directors and seven shareholders with a minimum share capital of Rs.5 lakh. Unlike Pvt limited companies, there is no restriction on the public limited company related to the maximum number of members or shareholders to the transfer of shares. It raises its fund through public and accepts the public deposits. The Board of Directors has the power to govern and manage the Public limited company constituted as per the unanimous consent of the shareholders. However, there is a much more compliance burden on the Public limited company than Private Limited Company.
General Partnership
General partnership businesses are governed under the Indian Partnership Act 1932. The partners agree to cooperate to advance their mutual interests and are free to decide on various terms like sharing of profits, rights and duties by executing a partnership deed. Partners have unlimited liability and are jointly held liable for the debts and losses of the firm. A minimum of 2 people are required to start a partnership firm and the maximum limit is 10 for banking business and 20 in case of all other types of business.
Limited Liability partnership.(LLPs)
Limited Liability Partnership Act, 2008 governs LLPs in India. Limited Liability Partnership is an alternative business form which provides limited liability to the owners. It is a hybrid combination of a limited and partnership company which provides the advantages of Company and flexibility of a Partnership firm. The partners and the firm are considered as distinct legal entities. The rights and duties of designated partners in this case are governed by the LLP agreement. Like partnership, LLPs also must have a minimum of 2 partners. However there is no maximum limit prescribed.
One Person Company (OPCs)
OPC or One Person Company is registered under MCA and Companies Act, 2013. If you want to start a corporation with less compliance, then One Person Company registration is the best.
OPC has only one person as its member. It can be seen as a fusion of Sole-Proprietorship and Company form of business. In order to enable a person who is carrying on the business in the Sole-Proprietorship firm to enter into a corporate outline with relaxed or concessional requirements under the Act, the Companies Act 2013 had brought in the new concept of OPC.
Section 8 Company
The primary purpose of registering a company as a Section 8 Company is to promote non-profit objectives such as trade, commerce, arts, charity, education, religion, environment protection, social welfare, sports research, etc. Any profits earned by the company are further utilized for fulfilling its objectives. There is no minimum capital requirement for company incorporation and the capital structure can be altered at any time as per the growth and requirement of the company. A Section 8 company also gets tax benefits which are provided by the Income Tax Act, 1961 for them.
Private Limited Company
A Private Ltd Company is a legal entity registered and formed under the 1956 Companies Act. It lies somewhere between a partnership and a widely owned public company. It is the most common type of legal entity that is preferred by millions of Indian businesses. The company can be registered with a minimum of two directors and a maximum of fifteen. A person can be both a director and shareholder. But at least one Director should be a resident Indian citizen. Further, the company should have a minimum authorized capital of Rs. 1 lakh.
Conclusion
The choice of the constitution would depend upon the specific need of the applicant. It is also necessary to be aware of the technicalities, benefits, pros & cons of each type prior to incorporating your entity under a specific business type. You should have clarity on the kind of business you are into, your goals and objectives since each of these types come with their own legal implications.
