A Company is defined as an association which is formed by natural persons, legal entities or a mixture between the two and the main purpose of the company is to develop commercial activities under the Indian Companies Act, 2013. Various legal experts define the company. Section 2(20) of the Companies Act, 2013, represents the ‘Company' as follows: "Company means a company incorporated under this Act or any previous company law."
There are mainly six types of Company registration in India;
1. Private Limited Company: In the Private Limited Company, personal assets are different from business assets. Every shareholder is responsible for his share of the total capital. Private Ltd Companies need to maintain the records of financial transactions, board meetings, and annual reports, and so on.
A Private Ltd company consists of a shareholder, whereas the total capital of an entity is made of shares. The shares can be sold or transferred to other individuals who then becomes one of the owners of the company. Further, a Private Limited Company consists of three types:
i) A company limited by shares means the company where the members are having its limited liability by the memorandum, if any, unpaid by the members.
ii) A company limited by guarantee is a company consisting the limited liability of its members by the memorandum to such amount as the members may respectively undertake to contribute the assets of the company in the event of its winding-up.
iii) Unlimited company – A company that has no limit on the liability of its members is called an unlimited company.
Here are a few examples of the private limited Companies: Flipkart, Parle, Snapdeal, Pepsi, Book mu Show, etc.
2. Partnership: Partnership business entities are similar to a sole proprietorship. The main difference between a partnership and sole proprietorship is that two or more members are necessary to form a partnership. The responsibilities, roles and the share of the partners are defined in an executed partnership deed.
The partners in a partnership deed define the ratio of profit sharing. In the case of the losses, each of the partners is responsible personally. Personal assets of partners can be used to compensate the losses incurred if any as decided by the partners. Examples of a partnership firm are as follows:
i. Twitter: It is founded by Evan Williams, Biz Stone, and Jack Dorsey and is an outstanding example of prosperous business partnership.
ii. Google: The founders of the Google namely Sergey Brin and Larry Page, ran a small search engine decade ago and turned it into the leading search engine in the entire world.
3. Limited Liability Partnership: Limited Liability Partnership firm is different from the partnership firm as the personal assets are different from the business assets. In case the business incurs damages, the personal assets of partners are not at risk as to the share capital in entity defines the maximum liability of every partner. As compared to Sole Proprietorship and Partnership, Limited Liability Companies always has good credibility among the investors. The basic reason includes the maintenance of incorporation, tax and financial records.
4. Sole Proprietorship: A company registered in the name of a single person is called Sole Proprietorship. That sole person is wholly responsible for the welfare of the entire business. The owner funds the business takes the profits and bear the losses. Do you know that companies like Coca-Cola, Apple, Hewlett-Packards, Amazon, etc. all started their company as Sole Proprietorship companies in India.
5. One Person Company: One Person Company (OPC) is a newly proposed type of company and is introduced in the Companies Act, 2013 to support entrepreneurs who are capable of starting a venture by allowing them to create an entity by an individual. The main advantage of an OPC is that there can be only one individual in an OPC, while a minimum of two members is necessary for incorporation and maintenance of the company or Limited Liability Partnership.
An OPC is a separate legal entity as per company which offers limited liability protection to its shareholders and has continuity of business and is accessible to incorporate.
6. Section 8, a Company: According to Section 8, a company is an organisation which is registered as a Non-Profit Organization (NPO). NPO/company has its objective of promotion of arts, commerce, charity, education, protection of the environment, science, social welfare, sports, research, religion and intends to apply its profits, if any, or other income in promoting its objects.