What is the best type of business registration for your business in India?

Let’s face it, entrepreneurship is difficult as it is, with so many issues, uncertainties, ups and downs, it can get pretty intimidating at times. However, once you have your MVP handy, your team ready, maybe even your first clients served, now you need to register your business and you are not sure what options you have, what business structure should you. to go for? Well you’ve come to the right place. Let’s take an in-depth look at the types of businesses you can have in India.

Companies explained.

A business is a legal entity formed by a group of people to employ and run a business. Depending on the company law of its administration, a company can be coordinated in various ways in matters of financial and fiscal responsibility. The nature of a business enterprise within a business will usually determine which business substructure it chooses, such as a partnership, corporation, or sole proprietorship. In this case, a business could be considered a type of business.

Types of companies for your startup

Limited liability company

The minimum number of members for a limited liability company is two and the maximum number of members at a time is 200. The statutory limit must be observed at all times. Learn more about Limited Liability Company in India.

One-person business

A type of private company, One Person Company is abbreviated as OPC. Due to the number of its members, OPC is very different from other types of businesses. At any time in the existence of the OPC, there is only one member. This member must be both an individual and an Indian resident in this case.

Public company

There is no maximum number of members in a public company. However, a minimum number of participants is required. A public company must have a minimum of seven members to be registered. Public enterprises are those that are listed on the stock exchange. These companies are able to attract funds from the public through public offerings (IPO or FPO).

Special application business structures

Partnership Limited by shares

In this type of company, the capital is introduced in the form of Shares, which means that the capital of the company is divided into a small part called shares. The shares represent the interest of the shareholder in the company. The number of shares held reflects the shareholder’s participation in the company. If a capital requirement arises in the company, the shares can be issued for subscription by the shareholders. The liability of the partners in this type of company is limited to the unpaid capital on the subscribed shares.

Company limited by guarantee

A company limited by guarantee can be either a public limited company or a public limited company, as long as the capital is not divided into shares. In this case, the capital to be introduced by the members has the character of a guarantee. The Memorandum subscriber subscribes to the guaranteed amount and signs their name against the guaranteed amount. In this case, the percentage of ownership is determined by the guaranteed amount. Whenever a capital requirement arises, members bring capital into the company. The liability of the members is limited to the amount of the guarantee provided. These companies can also issue shares, with shareholders being liable up to the amount outstanding on the shares, as noted above. However, shareholding is not a criterion for determining ownership.

Unlimited business

The liability of the partners in this type of company is unlimited. In the event of debt, the partners’ liability extends beyond their participation in the company to their personal assets. In the current scenario, entrepreneurs do not choose to incorporate this type of company. The liability of the partners arises when the company is liquidated or declared bankrupt, or whenever the capital has to be raised or the debt has to be paid. The public limited company is the most common type of company. Enterprises can be subdivided into different types, such as private or public enterprises, depending on their nature.

Foreign company

As the name suggests, foreigners own foreign companies. When the foreign participation in the shareholding exceeds 50%, an entity is classified as a foreign company. Businesses registered outside of India find it to be the most convenient way to establish a presence in India. These companies are registered as an Indian subsidiary of a foreign company.

Article 8 Company

Because it is registered as a corporation under section 8 of the Companies Act, it is called a section 8 corporation. It is registered as a charitable and non-profit organization. Because it is a section 8 corporation, it has special status and certain exemptions. Let me draw your attention to the fact that special approval from the competent authorities is required for the registration of the company under section 8.

Production company

A producer enterprise is essentially a company registered to take care of the primary production of its members active in the agricultural industry. The main focus includes everything from production to sale and export. A production company is a company with ten or more members who are producers, or at least two production institutions, or a combination of both. The liability of its members, like that of any other company, is limited to the amount of share capital unpaid by its members. According to this law, the production company is considered as a public limited company; however, the membership threshold does not apply.

Small business

A registered legal person can obtain the status of small business. It is not necessary to form a new business, but it is a status that it obtains due to its financial situation, the size of its employees and other factors. A business is considered small if it meets the following criteria: 1- It is not a listed company. 2- Paid-up capital: not more than fifty lakh rupees 3- Turnover: No more than two crore rupees, based on the income statement of the previous year. This also does not apply to holding companies or subsidiaries, Article 8 companies or companies governed by a special law. Finally, small businesses are exempt from certain compliance requirements under the Companies Act 2013.

Subsidiary company:

A subsidiary is a company in which another company controls the composition of its board of directors or more than half of its voting rights. When a single holding company owns 100 percent of the voting rights, the subsidiary is known as the wholly owned subsidiary (WOS) of the holding company.

Investment company

A holding company is a company which controls or holds the majority of the voting rights of another company (subsidiary as referred to above). A holding company is also called a parent company.

Sleeping company

When a company is incorporated and registered under this Law for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may contact the registrar in the manner prescribed to obtain dormant company status. . An inactive company is a company that has not carried on any activity or activity, has not carried out any significant accounting transaction during the last two fiscal years or has not filed financial statements and annual reports during the past two fiscal years. .

State company

A public enterprise is defined as any enterprise in which the central government, any state government or a combination of the central government and one or more state governments owns at least 50% of the share capital. It also includes a business that is a subsidiary of a Crown corporation. Special Provisions: (a) The central government will appoint or re-appoint the auditor of a state-owned company on the advice of the Comptroller and Auditor General of India. The Auditor General will have the power to direct the auditor of the company in the manner of controlling and exercising his functions. It also has the power to designate persons responsible for carrying out an additional audit of the company’s accounts; and the auditor is required to submit a copy of his audit report to the Comptroller and Auditor General, who has the authority to comment on the report. (b) When the central government is a member of a state corporation, the central government shall prepare an annual report on the operations and affairs of the corporation within three months of the annual general meeting at which the report of audit is presented. The annual report, together with a copy of the audit report, must be tabled in both Houses of Parliament.

Farewell Notes-

If you are someone looking to register a business in India and you are lost in the depths of the MCA provisions when it comes to all the different types of legal entities you can register, it is natural to take some care. step back and consider what you really want to require by registering your business. Your choices will depend on your requirements, ultimately this is not legal advice and the best person to help you with this is your lawyer.

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