Are you planning to start your own company in India? Understanding the legal structures and classifications of businesses is crucial for compliance and operational efficiency. The Companies Act, 2013 categorizes companies based on various factors such as the number of members, liability, size, control, access to capital, and ownership.
In this detailed guide, we will explore the different types of companies in India, their characteristics, and their significance.
List of Different Types of Companies in India
The following table provides a classification of companies based on various criteria:
| Criteria | Types of Companies |
|---|---|
| Based on the number of members | Private Limited Company, Public Limited Company, One Person Company |
| Based on the liability of members | Companies Limited by Guarantee, Companies Limited by Shares, Unlimited Company |
| Based on size | Small Companies, Micro Companies, Medium Companies |
| Based on control | Holding Company, Subsidiary Company |
| Based on access to capital | Listed Company, Unlisted Company |
| Based on ownership | Government Company, Foreign Company, Associate Company, Section 8 Company, Dormant Company |
Overview of Different Types of Companies in India
Public Limited Company
A Public Limited Company is a business entity in which shares are publicly traded on the stock exchange. There is no maximum limit on the number of shareholders, but at least seven members are required to establish it.
Private Limited Company
A Private Limited Company is a privately owned business with a maximum of 200 shareholders. The shares of a private company cannot be traded publicly.
One Person Company (OPC)
An OPC is a company with only one shareholder who can also serve as the director. It allows small businesses to function with limited liability while maintaining full control over operations.
Companies Limited by Guarantee
In a company limited by guarantee, members agree to contribute a specific amount in case of dissolution. Their financial liability is limited to the agreed amount.
Companies Limited by Shares
These companies issue shares to raise capital, and shareholders’ liability is restricted to the unpaid amount on their shares.
Unlimited Company
In an unlimited company, members have no liability cap, meaning their personal assets may be used to meet business debts if required.
Small Companies
Small companies have a paid-up share capital of less than ₹4 crore and an annual turnover of less than ₹40 crore, making them eligible for regulatory benefits under the Companies Act.
Micro Companies
Micro companies have plant and machinery investments not exceeding ₹1 crore and an annual turnover of less than ₹5 crore.
Medium Companies
Medium companies have plant and machinery investments below ₹50 crore and an annual turnover below ₹250 crore.
Holding Company
A holding company owns and controls one or more subsidiary companies. It plays a significant role in managing and directing the operations of its subsidiaries.
Subsidiary Company
A subsidiary company is owned and controlled by a holding company, which may have either full or partial ownership.
Listed Company
Listed companies trade their shares on the stock exchange, allowing investors to buy and sell shares freely.
Unlisted Company
Unlisted companies are privately owned businesses whose shares are not available for public trading.
Government Company
A government company is one in which the central or state government owns more than 50% of the shares.
Foreign Company
A foreign company is incorporated outside India but operates within the country through branches, subsidiaries, or joint ventures.
Associate Company
An associate company is a business where another company has significant influence, typically owning at least 20% of its shares.
Section 8 Company
Section 8 companies are non-profit organizations that work towards social causes such as education, healthcare, and environmental protection.
Dormant Company
A dormant company is registered but remains inactive for two consecutive financial years. It is often kept in reserve for future projects.
Understanding the different types of companies in India helps entrepreneurs make informed decisions about the legal structure that best suits their business needs. Each type has distinct advantages and regulatory requirements, making it essential to choose wisely based on your business goals.
By knowing these classifications, you can navigate India’s corporate landscape efficiently and ensure compliance with legal norms while optimizing business opportunities.
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