Types of Company Registration
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Types Of Company Registration
Businesses in India are classified at different levels as per the companies act 2013 on the basis of members and size. The majority of businesses in India are owned by small and medium enterprises and fall under the MSME act. In order to promote such industries, these businesses are classified as micro, small and medium entities. In addition, companies can be categorized according to their ownership, liabilities, and listing status. The following covers the different categories of businesses depending on various criteria.
Company Registration Certificate [Sample]
- Pvt Ltd
- LLP
- OPC
- Public Ltd
- Section 8
What is Company Registration
Company registration is a process of incorporating a business or start-up in India. The companies/start-ups are registered under the Companies Act 2013. According to the guidelines of MCA, it is mandatory legal compliance for all businesses to have a certificate of incorporation. The advantage of incorporating a company is that it is treated as a separate legal entity and stakeholders' liabilities are limited.
Different types of company
Businesses in India are classified into various types of the company on their size, share, and nature. Let's look into the following kind of companies in brief.
MSME companies based on size
MSME is an acronym for Ministry of Micro, small and medium enterprises. Such businesses usually have low share capital.
The company that is classified by liabilities
1. Unlimited company
An unlimited company means a company is not having any limit on the liability of its members.
2. Limited by shares
The limited company requires a minimum of three Directors and has no limit on the maximum number of shareholders. The stakeholders are only liable for the amount they have put into the company. The MOA limits the liabilities of such companies.
3. Limited by guarantee
Charitable NGOs usually prefer such companies, where guarantors hold liabilities and stakes in the company. Who agrees to contribute a nominal amount in case of winding of a company.
The company based on listing
1. Listed Company
Public limited companies are listed on the Stock exchange market, where anyone can buy their shares freely.
2. Unlisted Company
Private stakeholders usually own unlisted companies, and the general populace cannot bring their stocks as such companies are not listed on the stock exchange market.
Companies based on Control
1. Holding Company
Holding companies are entities created to buy the shares of other companies and act as owners.
2. Subsidiary Company
A subsidiary company is an entity that is owned by other enterprises or operates under a parent company.
Types of company registration (business structure) in India
Under the companies act of 2013 government has introduced various business structures for entrepreneurs to register their companies. Each form has its applications and unique features to promote business depending upon the nature of the business.
Such as:
Private limited companies
A private limited company is a kind of business where ownership of the company stays with private stakeholders. However, the company is termed as a distinct legal entity from its stakeholders, and shares limit the liabilities of its stakeholders as per MOA.
Private limited company incorporation is one of India's most preferred business structures. Almost 80% of companies in India are registered as private limited.
Public limited company
A public limited company is a business structure incorporated under the companies act 2013. A minimum of 7 members and three directors are required to register a public company in India. A public company is listed under the stock exchange, allowing its shares to be brought by anyone freely.
Limited liability partnership
Limited Liability partnerships are a new concept introduced by Government. LLPs are a hybrid business structure that provides the benefits of a private limited but the flexibility of a partnership firm. A minimum of 2 members are required to register an LLP in India. The liability of its members is limited by share.
One person company
One person Company (OPCs) was introduced under the companies act 2013. Only a single member is required to start such a company. The concept was presented to promote start-ups in India. The advantage of OPCs is that it is treated as separate legal entity. Thus, the liabilities of the owner are limited.
Section 8 Company (NGO)
A company is deemed a section-8 company when it registers itself as a non-profit organization. Section-8 companies are driven by the concept of social cause and promote subjects such as sports, religion, art, music, and culture.
Some other types of Company registration
Partnership Firm
In such a business, the liabilities of shareholders are unlimited, and it's highly unrecommended by professionals. Two or more members are required to register a partnership firm, and both members are liable for the firm's liabilities.
Sole proprietorship
Sole proprietorship firms are businesses where only one person manages the whole company. The difference between an OPC and a sole proprietorship is that the owner's liabilities are not limited.
Producer company
Producer companies are a hybrid form of limited company and cooperative societies. It requires 10 or more individuals or a group to form a producer company. These entities can register either as a public limited or a private limited.
Nidhi company
Nidhi companies are deemed as Non-banking financial sector companies which work on the principle of mutual benefit. Such companies are famous in the southern Indian state of Tamilnadu. Nidhi companies are allowed to borrow and lend money from their members only. Such companies must incorporate the word Nidhi limited with their names.
Benefits of incorporation of the company
- A business registered under the companies act is treated as a legal entity distinct from its stakeholder. Therefore the liabilities of owners are limited and reduced personal risk of losing their assets.
- It is easy for a structured business to attract investors and angel investors or get bank loans to grow their business. Because the incorporation certificate increases the credibility and trust among investors.
- The Government runs various schemes to promote businesses in India, and only registered companies can benefit from these schemes. Such as tax exemption for three years if registered under start-up India registration.
Compliances
Here is the list of mandatory annual compliance to be followed by the company.
- Annual filing of return
- Maintaining of minute
- Yearly filing of income tax
- Board meeting of directors 4 times a year
- Books of Account and other relative books to be maintained
- Appointment of the auditor within 30 days of incorporation
Frequently Asked Questions
How many types of company registration are there?
Per the companies act 2013, there are seven types of business structure/ company registration in India.
- Private Limited Company
- Public limited company
- Limited liability partnership
- Section- 8 (NGO-registration)
- One person Company
- Partnership Firm
- Sole proprietorship Registration
What is the minimum capital required for LLP company registration?
There is no limit on the minimum capital contribution required for LLP company registration.
What is the difference between a private limited company and one
person company?
To start a private limited company minimum of 2 members are required, and a maximum number of members can go up to 200 crores. The most significant difference between OPCs and a private limited company is that only one person is required to register an OPC.
How many directors are mandatory to have in a company?
The minimum number of directors required is 2; however, in the case of a one-person company, only one director is required.
How to Choose the right business structure?
Choosing the right business structure from the different company structures is crucial for the business. Hers is an insight into what questions an entrepreneur should ask before incorporating a company.
- The number of partners or stakeholders they want
- How much they can invest in the company initially
- Capability to handle Liabilities and personal risk
- Ability to bear registration and maintenance costs of a company
What is the process to register a company
- Acquire DSC
- Acquire DIN
- Create a director’s Account on the MCA portal and fill out all mandatory form
- Issuance of COI
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