Different Types of Company Registration in India

There are different types of companies being registered in India every year. The type of company you register has a major impact on your business. This article sheds light on all the pro’s and con’s of the company registration.

If you are planning to start a business, it’s crucial to fix the business structures. The organizational structure you choose will determine the taxes you have to pay, the compliance measures you need to follow, and the eligibility criteria you need to meet. Hence, it is one of the most vital decisions an entrepreneur should make. Know the different types of company registration in detail.

Different Types of Companies

As per the Companies Act of 2013, take a look at different classifications and types of companies and entities to pen in India.

Types of Company Registration

Company registration is the primary process by which business owners establish or incorporate their company. Since there are several types of companies in India, entrepreneurs have to ensure they choose a business type that suits their operations. In India, the Companies Act, 2013 provides 7 different structures to set up a business: 

1. Private Limited Company
2. Public Limited Company
3. Partnerships
4. LLP Registration
5. One Person Company
6. Sole Proprietorship
7. Section 8 Company

Private Limited Company

Private limited companies are suitable for businesses that require Private Limited Company as private entities. In this type of company, a group of shareholders distribute the liability amongst themselves to help protect their personal assets. The total capital of such business types is the total of all the shares held by each member of the company. Also, the personal and business assets of the members are considered separate, allowing for better protection and security. The shares of such a company cannot be publicly traded or transferred.

As per the Companies Act, to be eligible for this type of business registration, the following criteria must be met:

1. Minimum of two and maximum of fifteen directors 
2. At least one of the directors must be an Indian resident
3. Minimum of two and maximum of 200 shareholders or members
4. Additionally, an authorised capital fee amounting to at least ₹1 lakh
5. Must have a registered office address within India.

Types of Private Companies

1. Limited by shares: In such private limited companies, the liability of the members is limited to the normal value of shares owned by them 
2. Limited by guarantee: In this case, the liability of members is limited by the amount the members will contribute or guarantee to pay if the company goes bankrupt.

Public Limited Company

A public limited company is one whose shares may be purchased by members of the general public. In such business entities, there is no limit on the number of shares that can be sold or traded. Since the shares of the company are listed on the stock exchange, they can be traded freely, making the shareholders part-owners of the company. Such companies need to obtain a certificate of registration from the ROC before commencing business operations and the Conversion of Private Limited Company to a Public Limited Company will be held.

As per the Companies Act of 2013, the following criteria must be met to register as a public limited company:

1. Minimum of three directors 
2. At least one of the directors must be an Indian resident
3. Minimum of seven shareholders with no cap on the maximum limit
4. An authorized capital fee amounting to at least ₹5 lakhs
5. Must have a registered office address within India.

Partnership Firm

In partnerships, the handling of operations is by partners who have agreed on the role and share in profits. The functions, duties, powers, and number of shares held are all clearly defined in a verbal contract known as the partnership deed. These businesses fall under the purview of the Indian Partnership Act of 1932. 

Partnership firms can function with or without a license as long as they have a valid and registered partnership deed. However, most partnerships do register as it gives them additional rights and benefits. The eligibility criteria to form a partnership are: 

1. Minimum of two and maximum of fewer than ten partners
2. Must have a registered office address in India
3. Must have a registered partnership deed signed by all partners.

Limited Liability Partnership

Popularly called an LLP, the limited liability partnership is a new type of company in India. It enjoys a separate legal status, helping distinguish between personal and business assets, and granting the entrepreneurs limited liability protection. In LLPs, the liability of each partner depends on the number of share capital. 

To set up an LLP, the following criteria must be met: 

1. Minimum authorized capital amounting is upto ₹1 lakh
2. At least one of the designated partners must be an Indian resident
3. Minimum of two partners and no cap on the maximum number
4. At least one individual partner, if the rest are corporate bodies
5. No requirement for shared capital since each partner must have an agreed contribution.

One Person Company

The newest entry into the different types of company registration allowed in India is One Person Company and it is great for small businesses like Agriculture business. It is the best option for entrepreneurs who wish to run a business by themselves. The OPC has a separate legal status; entrepreneurs get the benefit of liability protection without having to partner with anyone else. 

Since it involves only one individual, an OPC is easy to incorporate and regulate. It essentially serves as a combination of the sole proprietorship and private limited company model of business entities. To register as an OPC, the following criteria must be fulfilled:

1. Minimum authorized capital amounting to at least ₹1 lakh
2. The individual must be a natural Indian citizen and resident 
3. The promoter must appoint a nominee during the incorporation
4. Financial businesses cannot incorporate as an OPC.

Sole Proprietorship

A sole proprietorship is where a single individual handles the running of the business. The company and the owner are considered as a single entity, making them solely responsible for profits and losses. Since the registration bears the name of the owners, tax filings and accounting reports will also bear the name of the owner, leading to unlimited business liability.

That said, it is the simplest form of business to set up and run. Home business owners and small business owners with a Supermarket Business Plan prefer this as it does not require much investment or compliance.

Section 8 Company

Commonly called a non-profit organization, Section 8 companies work for charitable purposes. The purpose is in the lines of promoting arts, science, literature, education, caring for the needy, and protecting the environment. Moreover, all the profits generated by them are used to achieve these objectives, and the members do not take dividends for themselves. 

To register a Section 8 company, you must meet the following criteria:

1. Minimum of two shareholders
2. A minimum of two directors and they can be shareholders as well
3. At least one of the directors must be an Indian resident
4. No minimum capital requirement
5. Must have a registered office address in India.

Conclusion

You can get any of these types of company registration easily with the help of Vakilsearch. Likewise, our experts will take care of the entire process and answer all your questions.

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