Once all the stakeholders are on board and founders have the perfect business model in place, it is usually the time to move to the step all entrepreneurs wait for the most – setting up and registering the company.
Different Types of Companies
Companies can classified into different types based on their mode of incorporation, the members’ liability, and the number of the members. The most common types of companies are:
- Royal Chartered Companies
- Statutory Companies
- Registered or Incorporated Companies
- Companies Limited By Shares
- Companies Limited By Guarantee
- Unlimited Companies
- Public Company (or Public Limited Company)
- Private Company (or Private Limited Company)
- One Person Company
Types Of Companies Based On The Mode of Incorporation
Companies can classified into three types based on whether they are created by a special act, special order, or are registered just like any normal company.
Royal Chartered Companies
Royal Chartered Companies are companies created by the Royal Charter. Therefore, This means they granted power or a right by the monarch or by special order of a king or a queen. Examples of Royal Chartered Companies are East India Company, BBC, Bank Of England, etc.
Statutory Companies are companies incorporated using a special act passed by the central or state legislature. They are mostly invested with compulsory powers and are responsible for carrying out some special business of national importance. And also, Some examples of statutory companies are The Reserve Bank of India (formed under RBI act, 1934), Life Insurance Corporation of India (established under LIC Act, 1956).
Registered Or Incorporated Companies
All the other companies incorporated under the company’s act passed by the government come under this head. These companies only come under existence after they register themselves under the act, and the Registrar of companies passes the certificate of incorporation. Google India Pvt Ltd is an example of incorporated companies.
Types Of Company Based On The Number Of Members
Public Limited Company
The legal existence of a Public Limited Company is separate from its members (shareholders), and the liability of its members also limited. Its existence is thus not affected by the retirement or death of its shareholders. A minimum of 7 members needed to form a Public Limited company, but there is no maximum limit on this. The company collects its capital by the sale of its shares to the shareholders. The shareholders of a company do not have the right to participate in the company’s day-to-day management, thus separating ownership from management. The Board of Directors takes all the major decisions of the company.
Private Limited Company
Private Limited (Pvt Ltd) companies have more than 2 and less than 50 members, and their liability is limited or unlimited depending on the type of the company it is. Unlike Public Limited companies, the transfer of shares limited to its members and the general public cannot subscribe to its shares and debentures. Pvt Ltd companies exempted from many rules and regulations. Which apply to Public Limited companies, such as the need to file a prospectus with the Registrar. The need to hold the statutory general meeting or maintain annual reports, etc.
Also, it can start operations after receiving just the certificate of incorporation, whereas a Public Limited company needs a certificate of commencement as well. It is a great option if you want the advantages of limited liability and yet want greater control over your business and maintain its privacy. This is the most popular type of company for startups to registered as.
One Person Company
One Person Company (OPC) as a company type introduced in India’s Companies Act of 2013. It is similar to a sole proprietorship, but the owner shall have limited liability. Thus his assets would not be at risk of losses that need to recovered or if the company liquidated.
Types Of Company Based On The Liability Of The Members
In liquidation, the members of a company can either be liable to pay even from their assets or to the extent of the face value of shares held by them. It all depends on how the company registered.
Companies can classified into three types based on the liability of the members. These are –
Companies Limited By Shares
The shareholders’ liability limited to the extent of the face value of shares held by them. Most Pvt Ltd companies are of this type.
Companies Limited By Guarantee
In these companies, in the case of liquidation, the shareholders promise to pay a certain fixed amount to cover the company’s liabilities.
There is no limit on the liability of the shareholders. In the case of liquidation, they might have to pay even from their assets to cover the company’s liabilities. This type of company is quite uncommon today due to obvious reasons.
There are a lot of options to choose from when you plan to register your startup. Make sure you research the pros and cons of each and register your firm accordingly. Now that you know about different types of companies let’s move on to the guide on how to register your company.
The Startup Process
We know how important your dream business is to you. Therefore, we’ve come up with an all in one guide: The Startup Process to help you turn your vision into reality.
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