A Guide to Different Types Of Company Registration in India – Explore The 7 Types Company Registration In India
Updated on : Feb. 13, 2023 - 6 p.m. 17 min read.
What is a company?
A company is a legal entity that is separate and distinct from its owners and shareholders. According to the Indian Companies Act, 2013, a company is defined as an association of individuals, whether incorporated or not, for carrying on a lawful business or trade with a common goal of profit or not-for-profit. In India, companies can be formed as either a private limited company, public limited company, one-person company (OPC), limited liability partnership (LLP), or any other form as prescribed by the Companies Act.
A company has the ability to own property, enter into contracts, sue and be sued, and carry on business activities in its own name. The liability of the owners and shareholders is limited to the extent of their capital contribution in the company. This means that in the event of the company’s bankruptcy or financial distress, the personal assets of the owners and shareholders are protected.
The Companies Act, 2013 lays down the procedure for the formation, governance, and regulation of companies in India. Companies must comply with various legal and regulatory requirements, such as maintaining proper records and financial statements, holding regular meetings and boards of directors, and filing annual returns with the Registrar of Companies.
Various Types of Companies and Company Registration Processes
Businesses in India are categorized into various types based on factors such as size, number of employees, liability, and access to capital, as defined by the Companies Act of 2013. These categories include:
- Micro, Small, and Medium Enterprises (based on size)
- Private, Public, and Sole Proprietorship (based on the number of employees)
- Holding, Subsidiary, and Associate (based on control)
- Unlimited and Limited by Shares (based on liability)
- Listed and Unlisted (based on capital accessibility)
Types of Company Registration in India: In Detailed
There are seven different options for company registration in India under the Companies Act of 2013. These options can make the process of selecting the right type of registration challenging. To simplify the process, we have compiled a comprehensive list of the various company registrations and their application procedures. The seven types of company registrations in India are:
- Private Limited Company
- Public Limited Company
- Partnership Company
- Limited Liability Partnership
- One Person Company
- Sole Proprietorship
- Section 8 Company
1. Private Limited Company
A private limited company is a popular form of business organization in India, which is suitable for small, medium, and large-sized businesses. It is a separate legal entity with limited liability and is governed by the Companies Act, 2013.
- Separate Legal Entity: A private limited company is a separate legal entity from its owners, which means that the company can enter into contracts, sue, or be sued in its own name.
- Limited Liability: The liability of the shareholder is limited to his capital contribution to the company, which protects his personal assets from getting used to settling the company's debts.
- Minimum Shareholders: A private limited company must have a minimum of two shareholders and a maximum of 200 shareholders.
- Minimum Directors: A private limited company must have a minimum of two directors.
- Shares: The shares of a private limited company are privately held and cannot be offered to the public.
- Transfer of Shares: The transfer of shares is restricted and subject to approval from the Board of Directors.
- Compliance: A private limited company must comply with many regulations and procedures as prescribed by the Indian Companies Act, 2013.
Incorporation Process of a Private Limited Company:
- Obtain DIN and DSC: The first step to incorporate a private limited company is to obtain a Director Identification Number (DIN) and a Digital Signature Certificate (DSC) for the directors of the company.
- Name Approval: The next step is to obtain approval for the proposed name of the company from the Registrar of Companies (ROC).
- Incorporation Documents: After obtaining the name approval, the next step is to file the incorporation documents, including the Memorandum of Association (MOA) and Articles of Association (AOA), with the ROC.
- Incorporation Certificate: Once the ROC is satisfied with the incorporation documents, it will issue an Incorporation Certificate, which signifies the registration of the private limited company.
- PAN and TAN: The next step is to obtain a Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) from the Income Tax Department.
- Bank Account: After obtaining the PAN and TAN, the company must open a bank account in its name.
- Compliance: The company must comply with the ongoing compliance requirements under the Companies Act, 2013, such as filing of annual returns and holding annual general meetings.
- PAN Card of the Directors and Shareholders
- Address proof of the Directors and Shareholders (Aadhar Card, Passport, Voter ID, etc.)
- Passport-size photograph of the Directors
- Electricity bill or Rent Agreement of the registered office address
- MOA (Memorandum of Association) and AOA (Articles of Association)
- NOC (No Objection Certificate) from the owner of the registered office
- Digital Signature Certificate of the Directors
- Director Identification Number (DIN) of the Directors
- Incorporation certificate from the Registrar of Companies (ROC)
2. Public Limited Company
A public limited company, as per Indian company law, is a business entity that can have its shares held by the general public. Such companies must go through the process of registering with the Registrar of Companies (ROC) before starting their commercial operations.
The registration process for a public limited company involves the following steps:
- Meet the eligibility criteria: A public limited company must have at least seven shareholders, three directors, and a minimum capital of ₹5,00,000.
- Obtain a DSC (Digital Signature Certificate): The DSC is required for submitting identity and address proofs.
- Apply for DPIN (Director Identification Number): All directors must obtain a DPIN from the Ministry of Corporate Affairs.
- Apply for company name approval: Submit the company name through the application, along with the objective clauses of the business.
- Submit ROC documents: Attach the Memorandum of Association (MOA), Article of Association (AOA), Form INC-7, Form INC-22, and Form DIR-12 with the ROC.
- Pay the registration fee: The ROC will approve the registration once the fee is paid.
- Obtain the “Certificate of Business Commencement”: After the business gets approval from the ROC, it must apply for the “Certificate of Business Commencement.”
Compliances under the Companies Act, 2013:
- Preparation of Financial Statements and Annual Reports.
- Holding Board Meetings and General Meetings.
- Filing of annual returns with the ROC.
- Filing of tax returns with the Income Tax Department.
The required documents for the registration of a public limited company are the same as those for a private limited company.
3. Partnerships Company
A Partnership Company is a type of business structure in India that is established between two or more individuals who come together to run a business. The partners share the profits and losses of the business and are jointly liable for the debts and obligations of the firm.
To incorporate a Partnership Company in India, the partners need to draft a Partnership Deed, which is a written agreement between all the partners that outlines the terms and conditions of the partnership. The Partnership Deed must be stamped and registered with the Registrar of Firms in the state where the partnership is located.
The following documents are required to be submitted during the incorporation of a Partnership Company:
- Identity and address proof of all partners
- PAN cards of all partners
- A Partnership Deed that outlines the terms and conditions of the partnership
- Bank proof of all partners
Features of a Partnership Company:
- The maximum number of partners in a Partnership Company is limited to 50.
- The liability of partners is unlimited, which means that partners are personally responsible for the debts and obligations of the firm.
- Partners have the right to participate in the management of the company.
- Profits and losses are shared by partners in the ratio agreed upon in the Partnership Deed.
4. Limited Liability Partnership (LLP)
Limited Liability Partnership (LLP) refers to a type of business structure that combines the benefits of a traditional partnership and a private limited company. In this type of partnership, the partners have limited liability for the company’s debts, meaning that their personal assets are not at risk in case of business failure. LLPs are governed by the Limited Liability Partnership Act, of 2008 and the rules and regulations prescribed by the Ministry of Corporate Affairs.
Incorporation Process of LLP:
The incorporation process for a Limited Liability Partnership in India involves the following steps:
- Obtain DIN: Apply for Director Identification Number (DIN) for all the partners who are going to be designated as the Designated Partners of the LLP.
- Choose a suitable name: Select a name for the LLP and check its availability by conducting a name search on the MCA portal.
- File LLP Agreement: Prepare the LLP agreement and file it with the Ministry of Corporate Affairs (MCA) along with the prescribed fee.
- Obtain Digital Signature Certificates (DSC): Obtain DSC for the proposed partners.
- File Incorporation Documents: Submit the required incorporation documents, including the LLP Agreement, e-Form 2 (LLP Incorporation), and e-Form 3 (Partnership Detail).
- Obtain LLP Incorporation Certificate: After the MCA approves the documents, an LLP Incorporation Certificate will be issued, which serves as proof of the LLP's registration.
Features of LLP:
- Limited Liability: The liability of the partners is limited to their agreed contribution to the LLP.
- Separate Legal Entity: The LLP is a separate legal entity from its partners, meaning that it can sue or be sued in its name.
- Flexible Management Structure: LLPs allow for a flexible management structure, as the partners can decide on the responsibilities and management of the company.
- Taxation Benefits: LLPs enjoy tax benefits, including lower compliance requirements and lower tax rates as compared to traditional partnerships.
- Easy Dissolution: LLPs can be dissolved easily as compared to companies, and the process of dissolution is less complicated.
Documents Required for registration of LLP:
- PAN card and address proof of partners
- LLP agreement
- Incorporation fees
- Digital Signature Certificates (DSC) of partners
- Proof of registered office address
- Identity proof of partners and designated partners.
5. One-Person Company
A One Person Company (OPC) is a type of company registered under the Companies Act, 2013 in India, where there is only one person who acts as the sole shareholder, director, and manager of the company. It's a hybrid between a sole proprietorship and a private limited company, which allows a single person to run a company with limited liability protection. In an OPC, the ownership and management of the company rest with one individual who acts as both the director and the shareholder. This type of company is intended to provide a simplified, more flexible, and cost-effective way of doing business for small entrepreneurs and start-ups.
Features of One Person Company:
- Single member: One Person Company has only one member, who is also the director.
- Limited liability: The liability of the member is limited to the extent of capital contribution.
- Legal status: An OPC is a separate legal entity from its owner and has the same rights and privileges as any other company.
- Easy to form: The process of forming an OPC is relatively simple and straightforward.
- No minimum capital requirement: There's no minimum capital requirement for an OPC.
Incorporation Process of One Person Company:
- Obtain Director Identification Number (DIN): The first step to incorporate an OPC is to obtain the DIN of the member who will act as the director.
- Apply for Name Approval: Submit the proposed name of the company and obtain name approval.
- File Incorporation Documents: File the MOA, AOA, and other necessary forms and documents with the Registrar of Companies (ROC).
- Obtain Certificate of Incorporation: After the ROC approves the incorporation documents, the company will receive the Certificate of Incorporation.
- PAN card of the member and director
- Proof of identity and address of the member and director
- DIN of the member and director
- Consent to act as a director
- Proof of registered office address
- Memorandum of Association (MOA) and Articles of Association (AOA)
- Any other documents as required by the ROC.
6. Sole Proprietorship
A sole Proprietorship is a type of business entity that is owned and run by a single person. It's the simplest form of business structure that is ideal for small businesses and individuals who want to start their own businesses. The business and the owner are considered as one entity, and the owner is personally responsible for all debts and obligations of the business. In India, a sole proprietorship doesn't need any separate legal registration, and the owner can start operating the business right away.
Features of Sole Proprietorship:
- Easy to start and manage: Starting a sole proprietorship is relatively simple and straightforward compared to other business structures. There's no need for extensive documentation, and the owner can start the business as soon as they have the necessary resources.
- Total control: The owner of the business has complete control over the operations and decisions of the business. They make all the major decisions and take all the responsibilities for the success and failure of the business.
- Flexibility: The owner can change the business as per their needs and preferences. There's no need for approval from any other party.
- Tax benefits: Sole proprietors can enjoy several tax benefits such as the lower tax rate and the ability to deduct business expenses from their personal income.
- Choose a business name: The owner has to choose a unique business name that represents their business and register it with the Registrar of Firms.
- Obtain necessary licenses and permits: Depending on the type of business, the owner may have to obtain licenses and permits from the local government.
- Start operating the business: Once the necessary licenses and permits have been obtained, the owner can start operating the business.
- PAN Card of the owner
- Aadhar Card of the owner
- Bank statement or canceled cheque of the owner's account
- Address proof of the business place
7. Section 8 Company
Section 8 Company, also known as a not-for-profit company, is a type of company registered in India. It's registered under the Companies Act of 2013 and operates for the promotion of art, science, commerce, or any other similar object. Unlike traditional companies, the primary objective of the Section 8 Company is not to make profits but to work for the betterment of society.
Features of Section 8 Company:
- The main objective of a Section 8 Company is to promote the well-being of society and not to earn profits.
- The company must have at least two members, and there is no maximum limit on the number of members.
- Section 8 Company has limited liability, and the members are not liable to pay debts beyond their share capital.
- Section 8 Company must have at least two directors.
- The company must have an authorized capital of ₹1,00,000 or more.
- Choose the Company's name and ensure its availability by checking with the Registrar of Companies (ROC).
- File the DSC (Digital Signature Certificate) and DIN (Director Identification Number) of the directors.
- File the Memorandum of Association (MOA) and Article of Association (AOA) along with the INC-9 form.
- Obtain a certificate of incorporation from the Registrar of Companies (ROC).
- Obtain a PAN card and TAN for the company.
- Register for GST (Goods and Services Tax) if required.
- PAN Card of Directors
- Voter ID/Aadhar Card/Driving License of Directors
- Proof of Address (Electricity bill/Rent Agreement/Bank Statement) of Directors
- Memorandum of Association (MOA) and Article of Association (AOA)
- Digital Signature Certificate (DSC) of Directors
- Director Identification Number (DIN) of Directors
- NOC from the owner of the registered office