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TYPES OF COMPANY REGISTRATION IN INDIA:

Posted by . On October 22, 2021 in Uncategorized

The Indian legal system allows various types of companies to exist under different 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 lays down guidelines for different types of company registration. 

Therefore the different types of companies in India are as follows::

  1. Private Limited Company – Private Limited Company is a business registration by private entity meant for small businesses. As per the provisions of the Companies Act 2013, there can be a minimum of 2 members and a maximum of 200 members in a company. In this form of company, there are a group of shareholders and the total capital is made up of shares withheld by each member.
  2. Public Limited Company  — Public Limited Company shares can be purchased by the general public. The company must have 3 directors and a minimum of 7 shareholders. In a Public Limited Company, there is no limit on the number of shares. The shares are listed on the stock exchange and can be traded freely. Such companies are owned by their shareholders. Companies under this category require a certificate from the Registrar of Companies (ROC) before starting their business operations.
  3. Partnerships — 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
  4.     Limited Liability Partnership — Popularly called an LLP, Limited Liability Partnerships        are also a new type of company in India. Moreover, it enjoys a separate legal status, helping distinguish between personal and business assets, and granting the entrepreneurs limited liability protection. In such firm types, the liability of each partner depends on the number of share capital, helping provide more protection than a Sole Proprietorship.
  1. One Person Company  —One Person Company (OPC) is the latest entrant in the different types of companies registered in India. It was introduced under the Companies Act 2013, in favour of entrepreneurs who possess the capability to run a business singlehandedly, yet successfully. The minimum paid-up capital of shares in an OPC is INR 1 Lakh. It is highly beneficial for owners of small businesses who do not need partners. Much in a similar way, OPC is regarded as a distinct legal entity from its members. The shareholders here have limited liability protection and this form of company is quite easy to incorporate.
  2. Sole Proprietorship —This is another type of business entity wherein a single individual handles the running of the business. However, in this firm type, the company and the owner are considered as a single entity, making them solely responsible for profits and losses. Moreover, 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. As a result, this type of company does not have a separate business registration process.
  3. Section 8 Company — This type of company registration is as a Non-Profit Organization (NPO). The objective of an NPO is primarily to promote arts, commerce and various forms of social welfare in the form of education, charity, religion and protection of the environment, to name few. Any profits, if generated, here are used in achieving its aforesaid objective. The dividends are also not paid to its members

It is important to choose your business structure carefully as your Income Tax Returns will depend on it. While registering your enterprise, remember that each business structure has different levels of compliances that need to be met with. For example, a sole proprietor has to file only an income tax return. However, a company has to file an income tax return as well as annual returns with the registrar of companies.

Various documents required for company registration are::

  • Proof of identification and address would be required for the incorporation of all the company’s directors and shareholders.
  • All the particulars of the directors and shareholders is to be submitted to the registrar at the time of registration. Pan Card/Aadhar card/Diving license/passport can be submitted as proof of identity. Latest Telephone Bill /Electricity Bill/ Bank Account Statement is to be submitted for proof of address.
  • Along with these documents the DIN and DSC of all the directors is also to be submitted. These documents mentioned are the general documents which are to be submitted for registration of LLP, One Person Company, Private Limited and Public Limited Company.

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