The corporate scene of India provides various kinds of business structures with related regulations, benefits and challenges. This blog will help you understand the kinds of company registration in India and select the one which fits your company.
Different Kinds of Company Registration
Here are the various types of company registration in India:
1. Private Limited Company
Among the most prevalent business structures in India is a pvt ltd company registration. It benefits from limited liability for its members, a clear management hierarchy, moderate compliance requirements and tax exemptions.
Legal Requirements for Private Limited Company Registration in India
You must satisfy the following criteria recommended by the Companies Act:
- Directors: at least 2 and maximum 15 directors have to be Indian residents.
- Shareholders: There have to be 2 to 200 shareholders of the company.
- Authorised Capital: The minimum authorised capital is 1 lakh.
- Registered Office: a registered place of business is needed.
Types of Private Limited Company registration
- Limited by Shares: Members are liable only to the shareholding value.
- Limited by Guarantee: Members are liable only for the amount they decide to contribute in case a company closes or even goes bankrupt.
2. Public Limited Company
A Public Limited Company is suitable for businesses with substantial operational footprints and large management teams. The primary advantage is that shares may be traded publicly enabling much easier fundraising and expansion. Stock exchange listings, limited liability and limitless growth potential are other benefits.
Legal Requirements to register a Public Limited Company
- Directors: More than three directors; one Indian resident.
- Shareholders: Seven shareholders minimum, no upper limit.
- Authorised Capital: Not less than 5 lakhs as Minimum authorised capital.
- Registered Office: You need to have a registered business place.
3. Partnership Firm
A Partnership Firm is a small entity managed by two or more partners. In this structure, all partners exercise equal control over profit-sharing and decision-making. Partnership firms are regulated by the Indian Partnership Act of 1932.
Legal Requirements In order to register a Partnership Firm
- Partners: 2 minimum and 10 maximum partners.
- Registered Office: You need A registered place of business.
- Partnership Deed: All active partners need to sign the deed.
4. Limited Liability Partnership
A limited Liability partnership is both a Partnership company and a private Limited company. LLPs offer limited liability to partners so they can protect their personal assets while remaining independent legal entities. This structure is preferred for its protection and flexibility.
Legal Requirements In order to register an LLP in India
- Authorised Capital: Minimum authorised capital is 1 lakh.
- Partners: At least two partners without an upper limit. At least one partner must be Indian.
- Partner Composition: More than one of the corporate partners must be a person.
- Capital Contribution: There is no maximum capital contribution threshold.
5. One Person Company
A One Person company is for single entrepreneurs who want the protection of A private limited Company but retain sole control. OPCs provide limited liability, low compliance costs and perpetual existence – a hybrid of private limited company and sole proprietorship.
Legal Requirements to register an OPC in India
- Authorised Capital: Minimum authorised capital is 1 lakh.
- Applicant: The applicant has to be an individual and an Indian national.
- Nominee : The applicant shall appoint a nominee.
- Exclusions: Businesses in the finance sector can not register as OPCs.
6. Sole Proprietorship
This structure is suitable for single entrepreneurs running a business. But it has downsides: unlimited liability, absolutely no perpetual existence, restricted scaling, high tax rates and no legal identity.
Benefits & Downsides
- Benefits: Easy to establish & manage with low compliance requirements.
- Downsides: Unlimited personal liability, difficulty raising funds and possible tax burdens.
7. Section 8 Company
Section 8 Companies are not for profit organisations. This particular structure is appropriate for NGOs along with philanthropic organisations which wish to operate in an organised fashion. Section 8 Companies receive tax exemptions and a legal identity.
Legal Requirements to register a Section 8 Company in India
- Shareholders & Directors : At the minimum two shareholders and directors (perhaps the same person carrying out both roles).
- Indian Directors: All directors shall be Indian residents.
- Registered Office: You must have a registered business place.
Conclusion
The choice of the proper legal structure is a vital step in launching a business in India. Every kind of company registration in India has its challenges and advantages. Think about each structure carefully based on your business requirements, compliance needs, tax implications and growth potential.
Whether you pick a limited company registration for India, a public limited company, a partnership firm, an LLP, an OPC, a sole proprietorship or a Section eight enterprise, knowing the differences between the structures can help you make an educated choice. This blog will help you understand the kinds of company registration in India so you are able to begin your journey of entrepreneurship easily.
FAQs
1. What are the types of company registrations in India?
There are 7 kinds of company registration in India:
- Private Limited Company
- Public Limited Company
- Partnership Firm
- Limited Liability Partnership
- One Person Company
- Sole Proprietorship
- Section 8 Company
Each type offers particular characteristics, legal requirements and benefits for specific business demands and sizes.
2. What’s a Private Limited Company and how is it distinct from a Public Limited Company?
Private Limited Company –
Private Limited Company is a popular business structure in India which restricts members’ liability to their shareholding.
Key Features:
- Limited liability protection of shareholders.
- Restriction on public share trading.
- Minimum 2 shareholders/maximum 200 shareholders.
- Minimum 2 & maximum 15 directors (one Indian resident).
Public Limited Company –
Ideal for bigger businesses with big operational scales and public share trading.
Key Features:
- No limit on the number of shareholders.
- Shares are freely traded on the stock market.
- At least three directors should be Indian.
- Must have more than 7 shareholders.
- Authorised capital Minimum five lakhs.
Key Differences:
- Share Trading: Public limited companies trade shares publicly while private limited companies don’t.
- Number of Shareholders: There is no shareholder cap on public limited companies whereas private limited companies have 200.
- Compliance & Disclosure: Public limited companies have greater disclosure and compliance requirements than private limited organisations.
3. What features does a One Person Company in India comprise?
A One Person Company is a limited liability company for single entrepreneurs that want to run a Company under the kind of a private limited business.
Key Features:
- Single Owner: A single individual owns and runs the company.
- Minimal Compliance: In comparison with other structures, OPCs have fairly low compliance requirements.
- Perpetual Succession: The company survives despite the owner changing.
4. What usually makes a Limited Liability Partnership distinct from a partnership firm?
Limited Liability Partnership –
- Legal Status: LLPs are legal entities distinct from partners.
- Limited Liability: Partners have limited liability and they’re liable to the degree of the investment.
- Perpetual Existence: LLPs remain in existence even if partners change.
- Management Flexibility: LLPs provide greater flexibility in management without major legal complications.
Traditional Partnership Firm –
- Limited Existence: The continuation of the partners usually depends upon the existence of the firm.
- Equal Control: All partners generally have equal control and management rights.
Key Differences –
- Liability Protection: LLPs offer limited liability protection compared with partnerships.
- Legal Identity: LLPs are legal separate entities from partnerships.
- Operational Flexibility: LLPs provide greater operational flexibility and fewer compliance requirements than traditional partnerships.
5. Why register a Sole Proprietorship versus other businesses?
Benefits of Sole Proprietorship:
- Complete Control: The owner makes all business decisions and operations.
- Easy of Setup: Sole proprietorships require fewer legal formalities to form.
- Lower Compliance: They face fewer compliance requirements than other business structures.
- Direct Profit Retention: The owner keeps all profits from the business.
- Tax Simplicity: Taxation is straightforward, with business earnings taxable as owner earnings.
Compare with Other Types:
- Limited Liability: Unlike private limited businesses, LLPs and OPCs, sole proprietorships provide limited liability protection. All business payments and responsibilities are due and payable by the owner personally.
- Perpetual Existence: Sole proprietorships aren’t perpetual and may be terminated at death or incapacity, unlike other incorporated entities which stay in business.
- Fundraising: Sole proprietorships might have difficulties raising funds versus private limited and public limited firms that issue shares.
