India’s corporate landscape is vast and different types of companies serve various industries and needs. Some of these types assist businesses operating as per the law. It also provides freedom, a shield, and expansion opportunities. They also offer flexibility, protection, and growth options. This guide explains the main types of companies in India and their features. If you want to start a company, LegalsExpert can help you every step of the way.
Types of Companies in India: Features and Benefits of Each
One Person Company (OPC)
An OPC is for the private individual who wishes to start a business alone. It gives a person absolute control while limiting their financial risk. Although an OPC technically has only one member, it allows up to 15 directors to help with running the company. This is suitable for small business owners who wish to avoid the challenges of having partners.
Private Limited Company
A private limited company is much preferred in India. The invention benefits all SMI, small to medium-sized companies, and business establishments. Such a kind of company has a minimum requirement of 2 members. The company cannot trade its shares in the public domain. This provides more privacy and control over the company. The owners’ finances are also covered. This makes it safe to grow business.
Public Limited Company
Public limited companies are meant for those businesses that raise funds from the public. These companies can be sold to anyone. There is no restriction on the number of shareholders, this type of corporation should have a minimum of seven members and three directors. It is very suitable for big businesses to expand and operate on a major scale.
Section 8 Company
Section 8 companies are made for charities or non-profits. These companies aim to help with education, social welfare, and similar goals. They cannot give profits to members. Instead, they use all their money to further their mission. This type is perfect for NGOs and groups focused on helping society. With LegalsExpert, setting up a Section 8 company is simple and hassle-free.
Micro, Small, and Medium Enterprises (MSMEs)
There is the MSME Act, which gives businesses a categorization of their sizes. These categories ensure special government benefits are given to small businesses.
- The micro-companies are very small-scale businesses. Up to ₹1 crore can be invested here. In one year, ₹5 crore can be earned. This is the best category for startups and small traders.
- Small entrepreneurs are eligible to invest up to ₹10 crores; they can earn up to ₹50 crores. These businesses also have low compliance requirements.
- Medium enterprises can raise to ₹50 crore and generate up to ₹250 crore.
They are suitable for those looking to grow bigger.
Companies Based on Liability
Companies can also be grouped based on the financial risk members take-
- Limited by shares: Members only lose what they haven’t paid for their shares. This is the most common type.
- Limited by guarantee: Members agree to pay a fixed amount if the company needs it. This is often used by non-profits.
- Unlimited company: Members must pay all debts, even using personal money if needed. This type is rarely chosen because of the high risk.
Holding and Subsidiary Companies
A holding company owns most shares or voting power in another company. In this way, it exercises control over the policies and management of the other company, called a subsidiary. However, the holding company does not conduct the daily tasks.
A subsidiary company is a company that is run under the umbrella of a holding company. A holding company that acquires all the shares is referred to as the Wholly Owned Subsidiary abbreviated as WOS.
Listed and Unlisted Companies
Some companies are classified based on whether their shares are traded on the stock market.
- A listed company sells its shares on recognized stock exchanges. This allows the public to invest. These companies must follow rules set by the Securities and Exchange Board of India (SEBI). They often raise money through IPOs (Initial Public Offerings).
- An unlisted company does not trade shares publicly. It gets funding from private sources like friends, family, or investors. These companies can become listed later if they choose to.
Why Companies Classification Matters
Choosing the right type of company is very important. It affects how a business follows laws, pays taxes, and raises money. With LegalsExpert, you can choose the best type of company for your needs and ensure smooth operations. For example:
- Legal Compliance: Companies must follow the Companies Act, 2013 rules.
- Tax Benefits: MSMEs often get tax breaks and subsidies.
- Growth Opportunities: Public companies can raise money easily from the public.
Conclusion
Different forms of companies in India can be popular based on the requirements of numerous types of businesses. The following types will assist those running small businesses, registered charities, or any big organization in making the right choice. We are here to support every single business, whether it is just an idea on a piece of paper or a rapidly growing enterprise.
Frequently Asked Questions
Can a private company become public?
A private company can be converted into a public company by fulfilling legal requirements such as altering its Articles of Association (AoA) and Memorandum of Association (MoA), passing necessary resolutions, and obtaining approval from the Registrar of Companies (RoC).
Do Section 8 companies pay taxes?
Section 8 companies, which are formed for charitable purposes, enjoy tax exemptions but must register under Section 12A or Section 80G of the Income Tax Act to avail these benefits. Compliance with certain conditions is mandatory.
What is the role of a holding company?
A holding company owns a significant portion of the shares in its subsidiary companies, enabling it to control their policies, management, and strategic decisions. It does not necessarily perform active business operations.
Is there a minimum capital to start a company?
As per the Companies Act, 2013, there is no mandatory minimum capital requirement to start a company. Entrepreneurs can begin operations with any amount of capital deemed necessary for their business.
