Different Types Of Business Registration In India!

Different Types Of Business Registration In India!

There are various forms of Business registration such as:

·         Sole Proprietorship

·         Partnership Firms

·         One Person Company (OPC)

·         Public Limited Company

·         Private Limited Company

·         Limited Liability Partnership (LLP)

·         Section 8 Company

1. Sole Proprietorship

A sole proprietorship is a business that is owned and managed by a single person. You can start your business without taking registration on the business name as compare to other business registration, which makes it very popular among the unorganised sector, particularly small traders and merchants. There is no such thing as registration; proprietorships are recognised by other registrations, such as a GST tax registration.

Features of Sole Proprietorship

·    Unlimited Liability: Just as a partnership, a sole proprietorship has no separate existence. Therefore, all debts can only be recovered from the sole proprietor. Therefore, the owner has unlimited liability with regard to all the debts. This should heavily discourage any risk-taking, which means that it’s suited to only small businesses. If you plan on running a business that requires a loan or may end up paying penalties, fines or compensation, it’s best you look into registering an OPC

·     Easy to Start: There is no separate registration procedure for proprietorships. All you need is a government registration relevant to your business. If you’re selling goods online, a proprietor would only need a sales tax registration. Therefore, starting up as a sole proprietor is relatively easy.

2. Partnership Firms

Partnership Businesses in India are governed by the Indian Partnership Act, 1932. A partnership is a form of business where two or more people share ownership, as well as the responsibility of managing the firm. Partnership business can be carried out with or without registration.

For registering your partnership firm, you have to create a Legal Partnership Agreement which will define the roles and responsibilities of each partner in the firm.

The partnership deed will define the profit sharing ratio between the partners. In case of losses, the partners have to be personally responsible for it. Personal assets of partners may be used to compensate the losses incurred if any.

However, in the case where the partnership deed is not registered, the partners may not be able to enjoy the benefits which a registered partnership firm enjoys.

                                      

3. One Person Company (OPC)

One Person Company is a hybrid form of Sole-Proprietorship and Company form of business which is governed under The Companies Act, 2013. This model is a stepping stone for entrepreneurs who can own and manage the business as a sole member and director of the Company.

As the name suggests, there can be only one member which is the biggest advantage unlike a Private Limited Company or a Limited Liability Partnership.

A One Person Company (OPC) is a separate legal entity from its member. The model offers separately limited liability protection to its shareholder and also gives an advantage of continuity of business.

It is highly beneficial for owners of small businesses who do not need partners. Much in a similar way, OPC is regarded as a distinct legal entity from its members. The shareholders here have limited liability protection and this form of company is quite easy to incorporate.

4. Public Limited Company

In simple terms, a company which is not a Private Limited Company is a Public Limited Company. They are also registered under, The Companies Act, 2013. Every such Company should have a minimum of 7 members and 3 directors. There is no restriction on the transfer of shares in a Public Limited Company. A Public Limited Company is a company that has limited liability and offers shares to the general public. It’s stock can be acquired by anyone, either privately through (IPO) initial public offering or via trades on the stock market. A Public Limited Company is strictly regulated and is required to publish its true financial health to its shareholders.

                         

  

5. Private Limited Company

Private Limited Company is the most sophisticated form of doing business in India and almost every company in India belongs to this clan. They are registered under, The Companies Act, 2013. Under this structure of Company Registration, the business assets are separated from personal assets. The name of every such company has to end with the words Pvt. Ltd.

There are generally 3 kinds of the capital clause for a Private Limited Company:

1. Company Limited by Shares – The liability of the members is limited to the amount of the unpaid shares which are held by them.

2. Company limited by Guarantee – A company limited by guarantee does not usually have a share capital or shareholders but instead has members who act as guarantors. The guarantors give the undertaking to contribute a nominal amount as agreed in the event of the winding up of the company.

3. Unlimited company – Under this, the members are personally liable to the company to an unspecified extent.

The maximum number of members for a private company is 200 with a minimum of 2. The company should also have a minimum of 2 directors.

6. Limited Liability Partnership (LLP)

This concept was first introduced under the Limited Liability Partnership Act, 2008. A LLP is a hybrid form of entity which has the characteristics of both, a partnership firm and a Company. The personal assets of partners are not put at risk as the maximum liability of each and every partner is defined by his share capital in the entity.

It is a more preferred business model for the investors over Partnership Firms and Sole Proprietorship as they have better credibility.

7. Section 8 Company

This type of company is registered as a Non-Profit Organization (NPO). The objective of an NPO is primarily to promote arts, commerce and various forms of social welfare in the form of education, charity, religion and protection of the environment, to name few. Any profits, if generated, here are used in achieving its aforesaid objective. The dividends are also not paid to its members.