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In general, an organization is defined as a group of people with a legal identity who have come together primarily to conduct business and make profits. Legally speaking, a company is defined as “a company incorporated under this act or under any previous company law” in Section 2(20) of The Companies Act, 2013. While there are many other kinds of companies operating today, those that are registered under the Companies Act of 2013 are recognized in India and have a legal identity.

In India, a significant number of companies are registered year. Approximately 154 thousand companies were registered in 2021, of which 151 thousand were private companies. This data clearly illustrates the large number of companies that are registered in the nation each year. This means that in order to determine which kind of company would be best for a certain business, it is necessary to be aware of the types of companies that are available under the Companies Act of 2013.

Companies are categorized according to a number of factors, including the number of employees, the extent of liability and shares, the basis for incorporation, the domicile, and some special types of companies that are provided by the Companies Act of 2013. We will go into great detail on the many types of companies that fall under the Act in India.

Difference Between Public, Private Company and One Person Company

There Are Three Types Of Companies Based On The Number Of People: Public Company, Private Company And One-Person Company.

Public Company

According to Section 2(71) of the Companies Act of 2013, a public company is any business that is not a private one. Sections 3(1), 149(1), and 4(1)(A) include a list of requirements that must be met, including a lawful purpose, at least seven members, a minimum of three directors, and the need to add “limited” at the end of the company’s name. The ability of a public company’s shares to transfer shares and debt to the public, as well as the Act’s provisions designating a private company that is a subsidiary of a public company as a public company, are the primary distinctions between public and private companies.

Private Company

The Private Company is defined as a company with a minimum paid-up share capital as prescribed by its articles, which restricts the right to transfer shares. If the company is not a one-person business, the maximum number of members is 200. Section 2(68) of the Companies Act, 2013 addresses private companies. A private company must have two directors in addition to a minimum of two founders. “Private Ltd.” Must Always Be Appended to the End of the Company Name for a Private Company.

One Person Company

Introduced in the Companies Act of 2013, a One-Person Company (OPC) is a new type of company that permits one person to open a One-Person Company with at least one director. Since there is no partner in the formation of an OPC, it is crucial to mention the nominee’s name.

Limited Liability Company

Companies limited by shares, companies limited by guarantee and unlimited liability companies are three types of companies based on liability.

a business where each member’s liability is directly correlated with the share they invested, and the liability ends when the shares are paid in full. Companies classified as limited by guarantee are those in which members’ liability is restricted to the amount of the guarantee they have assumed for an enterprise. Members serve as the company’s co-owners. It seems sense on the surface for the third type to have unlimited member liability.

The most common type of business is a company limited by shares. A study conducted in 2021 looked at all active businesses, and of those, 13,44,857 were limited by shares, 8,317 were limited by guarantee, and 306 were limited liability companies.

Know more about Partnership Firm and Partnership Agreement

Statutory Company v/s Registered Company

Statutory businesses and registered companies are the two categories of companies that arise from the manner in which these entities were incorporated.

Organizations established specifically to provide services to the general public under a parliamentary act or statute are known as statutory firms. They are covered by the Companies Act, 2013 to the extent that it complies with the law authorized for the formation of statutory companies. A handful of these include the Life Insurance Corporation of India and the Reserve Bank of India.

Companies that are registered under the Companies Act of 2013 are the other category of companies. A corporation obtains legal identity and becomes an entity after it is registered in line with the Companies Act of 2013.

DIFFERENCE BETWEEN FOREIGN COMPANY AND INDIAN COMPANY

An Indian company is one that is based in India, whereas a foreign company falling under this category is one that is based outside of India.

A foreign company is defined as “any company or body corporate incorporated outside India which, has a place of business in India, whether by itself or through an agent, physically or through electronic mode; and conducts any business activity in India in any other manner under section 2(42) of the Companies Act, 2013. Section 379 through Section 393 include the provisions that apply to these companies.

Special Companies Under The Companies Act, 2013

There are certain special companies under the Companies Act, 2013 such as Section 8 companies, government companies, dormant companies, small companies and so on.

Section 8 Company

A Section 8 company is a limited company that is registered under this Act and has a license from the Central Government. This business typically spends all of its profits to further the goals of art, commerce, science, religion, welfare, and charitable giving, among other things. A Section 8 company is not required to terminate its name with Ltd. or Private Ltd.

Government Company

According to section 2(45) of the Companies Act, 2013, a government company is one in which the federal government or a state government that owns a subsidiary of a government firm holds at least 51% of the company’s paid-up shares.

Small Company

A small company is any non-public corporation with less than 50 lakh rupees in revenue, or less than 10 crores if specified. Such a company’s turnover cannot exceed 2 crores in a fiscal year and, if required, cannot exceed 100 crores rupees, as that term is defined in section 2(85) of the Companies Act, 2013.

Subsidiary Company

According to section 2(87), a subsidiary company is any other company’s subsidiary with respect to a holding company that controls the make-up of the board of directors and at least half of the voting power. When one firm has one or more subsidiaries, that company is said to be a holding company. It is the company that oversees and controls its subsidiaries.

Associate Company

Under Section 2(46) of the Companies Act of 2013, a company is considered an associate if it has a significant influence over another company, meaning that firm has at least 20% of the voting power. However, an associate company is not the same as a subsidiary.

Producer Company

A producer company is a legally recognized organization made up of farmers and other agriculturalists who want to raise the standard of their lives. According to the Companies Act of 1956, which has not yet been repealed for producer company purposes, a producer company is any company whose goals are listed in section 581B and that is registered under that Act.

Dormant Company

The final category of company is a dormant company, often known as a sleeping company, which is registered for future use only and does not currently engage in any accounting activities. A discontinued firm can become one if it is not currently operating.

According to the Companies Act of 2013 in India, these were all the different kinds of companies, along with a few special entities.

There are a lot of different types of companies present nowadays and it may be confusing for people to conclude which type of company they can register to carry on the business they want. Expertkhoj can guide you on how to register your company and the legal aspects of the type of company you choose. To get an online legal consultation with your lawyer, book an appointment through our “Online Consultation” page.