The companies can be divided into different types based on parameters such as the size of the company, the number of its members, Control of ownership, Liability to shareholders, need for capital from the public & On the basis of the manner in which capital can be accessed. A company is popularly referred to as a group of people coming together with resources in terms of capital, manpower, and skill for the common objective of making profits.
In the old companies Act 1956 a company should have at least 2 persons as its member or shareholder. However, the companies Act 2013 introduced a new concept of One Person Company in India wherein only one Indian person who is a citizen of India can register a private limited company with some limitation, the different types of companies can be classified based on different parameters.
- On the basis of size, a company can be divided into two categories (a) Small companies (b) Other companies
- On the basis of the number of members: (a) One person company (b) Private companies (c) Public companies
- On the basis of control: (a) Holding companies (b) Subsidiary companies (c) Associate companies
- On the basis of liability: (a) Limited (i) by Shares (ii) by Guarantee (b) Unlimited
- On the basis of the manner of access to capital: (a) Listed companies (b) Unlisted companies
In India, a company can be formed only by registering it with the concerned registrar of companies by following the procedure prescribed under the Companies Act or the rules framed thereunder. Though there are provisions in the act by which Fifteen types of company can be incorporated like an unlimited company, guarantee company apart from public limited, private limited companies, following are the most common types of company which can be incorporated in India.
Public Limited Company
A public limited company is a company that can raise a large amount of capital not only from its promoters, close relatives, or investors but also from the public at large by offering its securities for sale in the open market. The shares of a public limited is a freely tradeable item and can be listed on a stock exchange for real-time sale, purchase, and delivery. These are generally large companies which need a huge amount of resources, You Can Read about the advantages of a public limited company by clicking here. On the other hand, the compliance requirement is very high which is costly and time-consuming. In order to safeguard the interest of investors and in particular the small investors there are strict controls and regulations prescribed under the law to comply. The accounts of a public company need to be published and are open for inspection at the concerned registrar of companies. In view of public trading of the shares in stock exchanges, there is always a risk of losing control of the company by the promoters. due to its huge size and structure, the decision-making is slow click here to read more on the disadvantages of the public limited company. in our opinion, a public limited company is suitable for capital-intensive industries with large operations.
Private Limited Company
A private limited company is a type of company that is formed with a minimum of two shareholders and two directors, The minimum requirement with respect to authorized or paid-up capital of Rs. 1,00,000 has been omitted by The Companies (Amendment) Act, 2015 w.e.f. 29th of May, 2015. Another crucial condition of a private limited company is that it by its articles of association restricts the right to transfer its shares & also prohibits any invitation to the public to subscribe for any securities of the company. The maximum of 200 persons can become a shareholder in the company. A private limited company is exempted from various provisions of the Companies Act 2013 in comparison with the public limited company. In other words, some of the sections and proviso are applicable to only public limited companies as they have been specifically marked as not applicable to a private limited company. Click here to read exemptions available to the private limited company under the Companies Act 2013. A private Limited company can be formed in three variations. (a) as a private limited company, (b) As a small private limited company, (c) As a One Person Company (OPC).
Small Private Limited Company
A Private Limited company is a type of company having capital up to Rs. 50 Lac and whose turnover has not crossed Rs. 2 Crore in any financial year is considered as a small company. Another requirement is that to be considered a small company it should not have been formed by a company which is not a small company. There are certain exemptions available to the small companies which are almost the same as that of a one-person company. The government filing fee for MCA filing is considerably low for a small company.
One Person Company (OPC)
One Person company Popularly also known as OPC, which can be incorporated by only one person as its owner, however, it can have many directors subject to limits prescribed by the act. A nominee of the owner of one person company must be declared with the consent of such nominee.
Section 8 Company: is a company which has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or any such other object; and which intends to apply its profits, if any, or other income in promoting its objects; and intends to prohibit the payment of any dividend to its members.
The Legal Framework: The law which prescribes and regulates the registration of the private limited company is laid down in The Companies Act 2013; and the Companies (Incorporation) Rules, 2014 Which has been recently amended to simplify the process of incorporation of the companies in India. It is imperative on the part of every individual to know that the Act of 2013 has superseded the Companies Act, 1956 after the President of India gave his affirmation on 29th August 2013.
No business can be called a company unless it is incorporated/registered with the registrar of companies in pursuance of law laid down in the companies act 2013 and the rules framed thereunder. With the incorporation of a company under the companies act 2013 it acquires a distinct legal identity that is different from that of its owners/promoters. List of Different Types of Companies which can be formed under The Companies Act, 2013 is as under
- Public Company Limited by shares
- Public Company Limited by Guarantee having a share capital
- Public Company Limited by Guarantee and having no share capital
- Public unlimited Company having a share capital
- Public unlimited Company not having a share capital
- Private Company Limited by shares
- Private Company Limited by Guarantee having a share capital
- Private Company Limited by Guarantee and having no share capital
- A private unlimited company having a share capital
- The private unlimited company not having a share capital
- OPC Company limited by shares
- OPC Company limited by guarantee having a share capital
- OPC Company limited by Guarantee and having no share capital
- OPC unlimited Company having a share capital
- OPC unlimited Company not having a share capital.
Fulfilling Buyer Criteria
Each small business wants to do business with large enterprises for their growth and expansion. However, it is imperative to note that most of the large enterprises prefer to do business with business entities that are registered. This also enables the registered business to participate in tenders and fulfill various requirements of buyers as well as customers.