Types of Company Registration in India

The definition of the word ‘Company’ signifies any entity formed under the Companies Act, 2013. Also, the process of company registration depends upon the type of the company, which could be a Private Limited Company or One Person Company or Limited Company or Section 8 Company, and based on the activity and requirement of the promoters, different types of company registration can opt under the Companies Act, 2013.

Types of Company Registration as per Companies Act 2013

Private Limited Company

This is the most popular form of business entity in India. In a Private limited company, business assets are separated from personal assets. Therefore, Each shareholder is only responsible for his share of the total capital. Compliance of a Private Limited Company includes maintenance of records of financial transactions, board meetings, and annual reports, and so on. Also, the total capital of the entity is made up of shares and these shares can be sold/transferred to another individual who becomes one of the owners of the company after such transfer or selling of shares. The shares of a Private limited company cannot be traded on the stock exchange and neither can it go for IPO to the public.

The Private limited company can be of three types:

i) Company limited by shares – The liability of members is limited by the memorandum to the amount. If any, unpaid on the shares respectively held by them.

ii) Company limited by guarantee – The liability of its members is limited by the memorandum to such amount as the members respectively undertake to contribute to the assets of the company, in case the company is winding up.

iii) Unlimited Company – Here, there is no limit on the liability of its members.

Partnership

Partnership business entities are quite similar to a sole proprietorship. The basic difference between a partnership and sole proprietorship is that more than one individual is involved in a partnership. There is a legal partnership agreement where the roles, responsibilities, and the share of each partner are specifically defined. Therefore, profit earned by the business is shared between partners according to the legal partnership agreement, and if there are losses, each of the partners is personally responsible (Partner’s personal assets may be used to compensate the losses incurred)

Limited Liability Partnership

The concept of an LLP was introduced in 2009 as a structured business model. It can be defined as a separate legal entity from the partnership entity. Where business assets are separate from the personal assets of the partners. The personal assets of partners are not put at risk. In case the business incurs losses, the maximum liability of every partner is defined by his share capital in the entity.

One Person Company

One person company was introduced in the Companies Act, 2013. The major objective was to support entrepreneurs capable of starting a venture, all alone by themselves. This is also done by allowing them to create a single person economic entity. It is interesting to note that, only one member is allowed in OPC. On the other hand, a minimum of two members is required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership. This is one of the biggest advantages of OPC Registration.

Of the various types of company registration available under the companies act 2013 OPC Registration is the only one that allows only one member.

Section 8 Company

Section 8 company is an organization, registered as a Non-Profit Organization (NPO). The major objective includes the promotion of arts, commerce, charity, education, protection of the environment, etc. Therefore, the application of its profits, if any, or other income is used to promote the objectives. It functions similarly like a limited company including all the rights and obligations that come with such a company. It is important to mention that it differs from a company in one very crucial aspect, i.e. it cannot use the words “Section 8” or “Limited” in its name.

If you are confused as to which types of Company Registration is more suitable for your business, our experts can help you select an ideal type of entity most suited to your business needs considering other factors such as Capital Requirement, the burden of compliances, funding, or loan requirement, type of ownership needed, etc. To have your free consultation today visit Company Registration Online.