One of the main aspects determining the type of tax or compliances must be following the organizational structure. Determining what sort of business registration is ideal for them is now one of the most important decisions a business owner can make. Moreover, our legal structure allows for many sorts of firms under various forms of company registration. In this article, we will look at the many business registration methods accessible in our nation.
Deep Analysis of Types of Company Registration
Registering a corporation is the first and most important step in incorporating a business. Because numerous types of companies exist in India, business owners must ensure that they select the appropriate business model for their activities. The Companies Act of 2013 has established several guidelines for various sorts of business formation in our nation. The following section highlights the various company kinds in India.
Public Limited Company
A Public Limited Company is one whose shares are publicly traded. There is no limit to the number of shares that may be traded or sold in this sort of corporation. Because the shares of a public limited company are listed on the Stock Exchange, they may be sold freely, making the shareholders owners of the firm.
Before beginning commercial operations, such businesses must get a registration certificate from the ROC. To register for this sort of business, the public limited company must now meet the requirements.
- A minimum of three directors must manage the public limited corporation.
- One of the three directors must be of Indian origin.
- A publicly-traded company must have a minimum of seven shareholders.
- Furthermore, a capital fee of at least INR 5 Lakhs is permissible.
- A registered company address in Indian territory is required.
Private Limited Company
Private Limited Companies are ideally suited for businesses that want to operate like privately held companies. In a privately owned firm, culpability is divided among the shareholders rather than placed on an individual member. This permits the members to protect their assets from any losses incurred by the firm.
A private limited company’s entire capital equals the total number of shares owned by each member. The members’ corporate and personal assets are considered distinct, providing better safety and assurance. Such a company’s shares cannot be disclosed or transferred to the general public. It is now one of the most common methods of business registration accessible in the country. The Companies Act of 2013 established the following conditions for establishing a privately held organization:
- A private limited corporation might have as few as two directors and as many as fifteen.
- At least one of the directors must be of Indian origin.
- A private limited business can have as few as two shareholders and as many as 200.
- Furthermore, a capital fee of at least INR 1 Lakh is permissible.
- Must have a registered company in the nation.
Types of Private Companies
Private companies are classified into the following types:
Limited by Shares
The responsibility of shareholders in such firms is restricted to the amount of their shareholding capacity.
Limited by Guarantee
In this instance, the shareholders’ responsibility would be equal to the contribution they committed to providing if the firm went bankrupt.
In this sort of business, the member’s responsibility is unlimited, meaning it is not limited in any way. This means that the member must pay for the loss with their assets in the event of a financial catastrophe.
Partnerships are another prevalent type of company formation in India. These firms operate under the auspices of the Indian Partnership Act of 1932. In this firm, the partners are responsible for managing the day-to-day activities following the written contract. The partnership deed will now include the positions, duties, functions, and number of shares. Partnerships can function without a license if they have a legal and registered company partnership deed. To be qualified for this sort of company, the partnership firm must meet the following requirements:
- A partnership company might have as few as two partners and as many as ten.
- They must have a legal office address in Indian territory.
- All of the parties concerned must sign the partnership agreement.
Limited Liability Partnership
The Limited Liability Partnership, or LLP, is a new kind of company registration in India. Furthermore, it has its legal character, which aids in distinguishing between business and personal assets and provides the entrepreneur with limited liability protection.
The responsibility of each partner in an LLP is determined by the quantity of share capital, providing more protection than a sole proprietorship. Now, to get the registration for such a company kind, the LLP must meet the following requirements:
- A minimal level of the share capital of one lacs is required.
- At least one of the partners must be of Indian origin.
- A minimum of two partners are required to establish this sort of business. The maximum limit is uncapped.
- If the remaining partners are corporate entities, at least one of them should be an individual.
- There are no restrictions on the acquisition of share capital.
One Person Company
Small businesses benefit most from the one-person firm model. Because this business form is part of the Companies Act 2013, it allows business owners who plan to carry out business operations solely on their own. One Person Company has its legal position, allowing it complete control over its business activities, assets, and liabilities. To be eligible for registration of this type of company, the OPC must satisfy the following requirements without exception: –
- The minimal share capital of one lakh rupees is required.
- The proprietor of the company should be Indian.
- The promoters must appoint the candidate for the incorporation of the company to take place.
- The one-person firm concept does not apply to financial lending institutions.
- If the paid-up capital surpasses INR 50 lakhs and the annual turnover exceeds two crores, the firm should be converted to a privately owned company.
Section 8 Company
A Section 8 corporation is commonly referred to as a Non-Profit Organization. Section 8 businesses are primarily concerned with human welfare. Profits awarded to such businesses cannot be utilized for personal gain; instead, they are used to fulfill organizational purposes. To be qualified for this sort of business model, the Section-8 corporation must meet the following requirements:
- At least two stockholders are required.
- Section 8 companies must have at least two directors.
- At least one of the directors should be of Indian origin.
- There are no restrictions on the capital needed.
- A registered company located in the nation is required for the company.
This is possibly India’s most popular business model since it empowers individuals to establish their enterprises. In such a business model, however, the owner and the firm are viewed as a single entity, making them fully responsible for profit and loss.
Furthermore, because the registration bears the owner’s name, accounting reports and tax filings will likewise bear the owner’s name, resulting in infinite responsibility. As a result, a sole proprietorship lacks a separate business registration process.
Before choosing a company model, one must know its advantages and disadvantages. The forms of business registration you select will determine the development and profitability of your venture. Choosing the correct company model also ensures continued presence in the given market.
Aside from profit and loss, other elements influenced the choice of a company plan. According to the recent trend, private business formation and sole proprietorship stand out among them all owing to their numerous benefits. If you want assistance with registration processes or documentation, we can assist you with the company registration process.