Types of Private Companies

Limited By Shares: In such private limited companies, the liability of the members is determined by the memorandum to amount unpaid on shares allotted to them.

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Limited By Guarantee: In this case, the liability of members is limited by the memorandum of the amount of members will contribute or guarantees to pay if the company goes bankrupt. Unlimited: Moreover, such types of business entities do not have any limit on the liability of its members. As a result, if the company assets fail to pay off creditors, members will have to use their private assets to clear debts, increasing the risk factor involved.

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. Further, as per the Companies Act, 2013 to be eligible for this type of business registration, the public limited company must meet the following criteria;

Minimum of three directors

At least one of the Directors must be an Indian resident

Minimum of seven shareholders with no cap on the maximum limit

Moreover, an authorised capital fee amounting to at least INR 5 Lakhs

Further, must have a registered office address within India

Partnerships

In such business entities, the handling of the operations is handled by partners, who have agreed to their role and share in profits. Hence, the functions, duties, powers, and number of shares held are all clearly defined in a verbal contract known as the Partnership Deed. Additionally, these businesses fall under the purview of the Indian Partnership Act, 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 themselves as that gives them additional rights. Moreover, to be eligible for this type of firm registration, the partnership must meet the following criteria;

Minimum of two and maximum of fewer than ten partners
Moreover, must have a registered office address within India
Additionally, must have a registered Partnership Deed signed by all partners 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. Moreover, to be eligible for this type of business registration, the LLP must meet the following criteria;

Minimum authorised capital amounting to INR 1 Lakh
At least one of the Designated Partners must be an Indian resident
Minimum of two partners and no cap on the maximum number
At least one individual partner, if the rest are corporate bodies
No required 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, OPCs are great for small businesses. Additionally, it became a part of the Companies Act 2013, to help entrepreneurs who wish to run a business single-handedly. Since such a firm type has separate legal status, entrepreneurs get the benefit of liability protection without having to partner with anyone else. Furthermore, since they involve only one individual, this type of firm registration is easy to incorporate and regulate. Moreover, this essentially serves as a combination of the Sole-Proprietorship and Company model of business entities. Additionally, to be eligible for this type of firm registration, the One Person Company must meet the following criteria;

Minimum authorised capital amounting to at least INR 1 Lakh.
Further, an individual must be a natural Indian Citizen and resident
The promoter must appoint a nominee during the incorporation
Additionally, Financial businesses cannot incorporate as an OPC.
Further, should convert to a Private Limited Company if paid-up capital exceeds INR 50 lakhs or turnover exceeds INR 2 crores.

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.

Section 8 Company

Commonly called a Non-Profit Organisation, such companies mainly work for charitable purposes. Moreover, it involves promoting arts, science, literature, education, caring for the needy, and protecting the environment. Also, all the profits generated by such types of companies are used to achieve these objectives, and the members do not take dividends for themselves. To be eligible for this type of firm registration, the Section-8 Company must meet the following criteria;

Minimum of two shareholders
Minimum of two Directors and they can be shareholders as well
At least one of the Directors must be an Indian resident
No minimum capital requirement
Moreover, must have a registered office address in India


Originally published  2021

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