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Company registration is mandatory in India to start a business. What kind of company one should register for is one of the crucial questions that comes to an entrepreneur's mind. In India, there are seven types of company registration, and they are taxed differently. This article will guide you through seven types of company registration.
By the end of this article, you will have a clear understanding of the different types of company registration in India and how to select the one that fits your needs and goals.
In India, many individuals opt to register their company as a proprietorship due to its lenient regulations. However, this type of business structure comes with a major drawback. If the company encounters financial difficulties, it can be quickly shut down because the law considers the owner and the business to be one and the same. This makes it a risky venture and unsuitable for legal purposes. It is not mandatory to register as a sole proprietorship. However, to gain tax benefits, people register their firm as a sole proprietorship.
A partnership firm is a common type of company registration in India. It is chosen by those who want to run the business through a partnership model. It is governed by the Partnership Act of 1932. Creating a partnership deed is a basic legal requirement to implement this business structure. The deed is then verified and authenticated by the Register of Firms (RoF). The deed specifies rights, duties, profit share, and so on for the existing partners. Partners must sign the deed before or after contacting RoF for validation.
Requirements for setting up a partnership firm:
The LLP Act 2008[1] regulates the formation and operation of LLPs in India. LLPs offer legal protection and stability to the partners, who are not liable for the debts or liabilities of the firm beyond their agreed contribution. To register an LLP, the partners need to draft an LLP deed that defines the rights and obligations of each partner. They also need to submit the required documents, such as PAN and Aadhaar cards of the partners, address proof of the firm, etc. Additionally, they need to fill and file the FiLLiP form on the MCA portal, which is an online application for incorporation of LLP.
One Person Company (OPC) is a business structure that was introduced in 2013 by section 2(62) of the Companies Act, 2013. It allows one person to be both the owner and the director of the company. OPC is ideal for entrepreneurs who want to have a small management team and full control and profit of their business.
To incorporate as an OPC, one needs:
NGOs or Non-Profit Organizations are companies that engage in charitable activities. Their main goal is to promote arts, science, education, protect the environment, and assist the poor.
To register as an NGO, a company needs at least two shareholders and directors. Usually, the shareholders also act as directors. This type of company does not need any capital. One of the directors must be a resident of India, and the company must have an Indian address for registration.
A Private Limited Company is a common and preferred type of business entity in India. It offers various advantages such as limited liability, clear management structure, less compliance burden, etc. The legal aspects of this business entity, such as conducting board meetings, changing directors, and expanding into new ventures, are regulated by the Companies Act 2013. The applicant has to visit the Ministry of Corporate Affairs (MCA) website to complete the registration process for this legal entity.
The following are the requirements to register as a private limited company:
To grow bigger, an organization can benefit from becoming a public limited company, as it gives them more advantages for expansion. But this business structure also has more legal requirements to follow. The Companies Act 2013 sets the rules for this business structure.
Conditions to form a Public Limited Company:
