Which Type Of Company Should You Incorporate? LLP, OPC, Pvt. Ltd or Others?
A developing country like India with the idea of "Make In India", there is an emergence of Entrepreneurs with new business ideas who are setting up Companies contributing a lot to the Indian economy.But, there is one very common confusion among all i.e. What type of business should be incorporated whether an LLP, OPC, Pvt Ltd or others? This article will give you a clear idea about all the company forms which will further help you in dealing with your confusion.
To start with, why do you need a Company?
If you are an entrepreneur with a new business idea, then you must have a separate identity and must be sure of the legal protection of the same. To obtain certain rights, a legal authority it is important to get a Company registered with the Ministry of Corporate Affairs.
What are the different options that you have?
There are several types of Company that one can register & the classification depends on various factors.
1. On basis of Incorporation:
Companies are classified into three types based on the incorporation.
- Chartered Companies: The charter incorporates this company and the nature of business of a Chartered Company are set by the characteristics of Charter which incorporates it. These form of business after Independence do not exist in India. Example of such Companies can be the East India Company(1600), Bank of England(1694).
- Registered Companies: The Companies which are registered under the Companies Act 1956, termed as registered companies. These are the enterprises that come into existence only when a certificate of incorporation is granted to them by the registrar and they are registered under the Companies Act.
- Statutory Companies: Certain businesses are registered by means of a special Act of the Parliament or any state legislature. These type of company incorporation are termed as Statutory Companies. Examples of a statutory company in India are Reserve Bank of India, the Food Corporation of India, also the Life Insurance Corporation of India, etc.
2. On the basis of liability:
The company can be classified into the following on the basis of liability;
- Companies limited by shares: The liability of the members of a company are limited to the amount (if any) uncompensated on the shares, such companies are said to be Company limited by shares. The liability can be imposed during continuation of the company as well as during the closing up. These are the companies where the shares are ultimately paid up & no notable liability rests on them.
- Companies limited by guarantee: These companies are those in which the liability of members is limited to amounts that they may respectively offer by the memorandum. This is to provide the assets of the company in the event of Companies misfortune.
- Unlimited companies: As the name suggest these are the companies which do not have a limit on the liability of its members and is termed as an Unlimited Company. Every member of an Unlimited Company is liable for the debts of the organization as in a regular partnership in proportion to his interest in the company.
3. On Basis of No. of members:
There are certain types of companies based on the number of members associated with the corporation;
- Private company: By the Articles of Association a Private Company must include the following;
- The right to transfer its shares are restricted.
- The number of members are restricted to fifty.
- It also prohibits any offer to the public to contribute for any shares or debentures of the company.
- In case two or more persons are owning one or more shares in a company jointly, they are acknowledged as a single member. The minimum requirements to form a Private Company are, there must be at least two persons to form a private company and it cannot exceed 50.
- Public company: These are the enterprises that requires a minimum of seven members to form a public company and they are different from the private Company. Only the shares of a public company can deal on a stock exchange.