What are the Types of Company? Explained
- Posted By SuperCA
- On 09 August
Any entity that is formed under the Companies Act 2013 is known as a company. Generally, most people think that a company means a private limited company but a company is a broad concept and can either be a private limited company or a one person company or a limited company or a Section 8 company.
On the basis of the activities and the requirement of the promoters, they can incorporate different types of companies under the Companies Act 2013. In this blog, we will discuss the various types of Companies.
A Private Limited Company
Private limited companies are classified into three categories:
- A company limited by shares
- A company limited by guarantee
- An unlimited company.
Private limited companies generally have either a minimum of two members or a maximum of 200 members.
A company limited by shares
The most common type of private limited company is a company that is limited by shares. This means that in the company, the liability of the members is limited to the amount unpaid on the shares held by them respectively, by the memorandum.
A company limited by guarantee
These types of companies have limited the liability of the members by the memorandum to such an amount that the members can undertake to contribute to the company' assets in case it is being wound up.
Unlimited company
An unlimited company means that there is no limit on the liability of the members of the company.
A one person company
A one person company also referred to as an OPC is a type of company that is newly introduced in India. One person company was introduced by the Indian government under the Companies Act 2013. This was done in order to support the entrepreneurs who have the capability of starting a business on their own by giving them the permit to create a single person economic organisation.
One of the main advantages of a one person company is that there is only one member in it whereas a minimum of two members are required to incorporate and maintain a private limited company or a limited liability partnership. One person company is a legal entity that is distinct from its members and provides the limited liability protection to the shareholders of the company and can be easily incorporated.
A Limited company
In order to incorporate a limited company a minimum of three directors is required but there is no limit to the maximum number of members or shareholders the company can have. Limited company has a lot more strict and extensive compliance requirements as compared to a private limited company.
A Section 8 company
A section 8 company is formed under the Companies Act 2013. The process for its incorporation is similar to the incorporation of section 25 companies under the old Companies Act 1956. One of the most famous types of non profit organisation in India is a section 8 company. It can be established in order to promote commerce, art, science, sports, education, research, religion, charity, social welfare, protection of environment or any other such objectives based on the fact that the company is willing to apply its profits in promoting its main objectives and wishes to prohibit to pay the dividend to its members.
The registration process of a section 8 company in India is similar to the incorporation of other companies except for an additional licence that is required for a section 8 company.
Conclusion
In this blog, we discussed the various types of companies like the private limited company, the one person company, the limited company and the section 8 company. We also discussed the various categories of a private limited company i.e. the company limited by shares, guarantee and an unlimited company.
