Types of Companies in India under Companies Act 

When starting a business in India, it’s important to choose the right type of company structure. The decision depends on several factors such as the number of members, liability of members, size of the company, control, capital, and ownership.

Let’s understand the different types of companies in India based on number of members, size, liability, control, listing, and capital. These companies comes under the Companies Act of 2013.

What is the Companies Act of 2013? 

The Companies Act of 2013 is a comprehensive legislation in India that regulates incorporation, governance, and operations of companies. It aims to enhance transparency, accountability, and corporate governance standards across all types of companies. 

The Act mandates rules for corporate structures, responsibilities of directors, shareholder rights, mergers, acquisitions, and insolvency proceedings. It also introduces provisions for Corporate Social Responsibility (CSR) and facilitates ease of doing business by streamlining regulatory requirements. 

What are the types of Companies in India?

In India, companies are classified under various categories based on different criteria defined by the Companies Act of 2013. This classification helps businesses choose a suitable legal structure aligned with their operational requirements and growth aspirations.  

Criteria	Types of Companies	Description	Key Features	Suitable for
Number of members	Private Limited Company	Minimum 2 and maximum 200 members.	Limited liability, shares not traded publicly, requires a minimum of 2 shareholders.	Small to medium-sized enterprises (SMEs), startups.
	Public Limited Company	Minimum 7 members, no maximum limit.	Shares traded on stock exchanges, strict regulatory compliance.	Large businesses raise capital from the public.
	One Person Company	Single-member ownership.	Provides limited liability to the single owner, acts as both shareholder and director.	Solo entrepreneurs starting small businesses.
Size	Micro Company	Small-scale enterprises with limited turnover and capital thresholds.	Entitled to exemptions, relaxed compliance norms under the Companies Act, 2013.	Very small businesses, startups.
	Small Company	Based on turnover, paid-up capital, and net worth thresholds.	Entitled to certain exemptions, relaxed compliance compared to larger companies.	Small-scale enterprises are seeking simplified compliance.
	Medium Company	Higher thresholds than small companies.	Stricter compliance than small companies, benefits over larger corporations.	Mid-sized businesses aiming for scaled operations.
Liability	Limited Liability Partnership	Partners have limited liability.	Combines partnership and corporate features, suitable for professional services.	Professional firms, consultants.
	Partnership Firm	Partners have unlimited liability.	Operates based on partnership deed, shared control and responsibility.	Small businesses prefer shared management.
Control	Public Sector Undertakings	The government held the majority stake.	Governed by specific regulations, it aims at public welfare and economic growth.	Industries crucial for national development.
	Private Sector Companies	Owned and controlled by private entities.	Operates based on profit motives can be privately held or listed.	Diverse sectors including manufacturing, services, technology.
Listing	Listed Companies	Shares listed and traded on stock exchanges.	Subject to stringent regulatory requirements, periodic disclosures.	Companies seeking public capital markets, broader investor base.
	Unlisted Companies	Shares not traded on stock exchanges.	More flexibility in operations, less regulatory obligations.	SMEs, family-owned businesses.
Capital	Equity Share Capital Companies	Capital raised through equity shares.	Shareholders have ownership and voting rights based on shareholding.	Companies raising funds from investors in exchange for ownership stakes.
	Debenture Capital Companies	Capital raised through issuance of debentures (debt instruments).	Debenture holders are creditors with fixed interest payments.	Companies needing funds without diluting ownership.
Ownership	Foreign Companies	Incorporated outside India but operating within the country.	Subject to Indian laws and regulations, including approvals and permissions.	Multinational corporations (MNCs) expanding into Indian markets.
	Associate Companies	Entities where another company holds significant influence but does not control management decisions.	Shares common ownership or significant shareholding by a parent or holding company.	Holding companies managing multiple subsidiaries.
	Section 8 Companies	Established for promoting charitable or non-profit objectives.	Members dedicated to promoting public welfare, tax exemptions available.	Non-profit organizations, charitable activities.
	Government Companies	The majority shareholding held by the government, operated for public interest.	Governed by governmental policies, focused on national development.	Industries crucial for government control and accountability.
	Dormant Companies	Registered entities with no significant transactions, awaiting future reactivation.	Enjoy exemptions from regular compliance, must maintain dormant status.	Companies are temporarily inactive due to strategic reasons.

Types of Companies based on number of Members

• Private Limited Company 
  • A minimum of 2 and a maximum of 200 members is required. 
  • Features: Offers limited liability to shareholders. Shares are privately owned and not traded on stock exchanges. 
  • Suitable for: Small to medium-sized enterprises and startups looking for limited liability protection and ease of operation. 

• Public Limited Company 
  • Requires a minimum of 7 members, with no maximum limit. 
  • Features: Shares can be freely traded on stock exchanges, offering liquidity to shareholders. Strict regulatory compliance is mandatory. 
  • Suitable for: Large businesses aiming to raise capital from the public and expand nationally or internationally. 

• One Person Company (OPC) 
  • One Person Company is owned and managed by a single individual. 
  • Features: Provides limited liability to the sole owner, who acts as both shareholder and director. 
  • Suitable for: Solo entrepreneurs who want to start a corporate entity with limited liability but without the complexities of managing multiple shareholders. 

Types of Companies based on Size

• Micro Companies 
  • Micro companies are a classification under the Companies Act, 2013, designed for very small enterprises. 
  • Ownership: Privately owned entities with a limited number of shareholders. 
  • Features: Enjoy certain exemptions and relaxed compliance requirements, including reduced filing fees and simplified auditing norms. 
  • Suitable for: Small businesses, startups, and enterprises with turnover and capital below specified thresholds. 

• Small Company 
  • Defined based on turnover, paid-up capital, and net worth criteria prescribed by the Companies Act. 
  • Features: Entitled to certain exemptions and relaxed compliance requirements compared to larger companies. 
  • Suitable for: Small-scale enterprises aiming for simplified regulatory compliance and operational flexibility. 

• Medium Company 
  • Like small companies but with higher thresholds for turnover, paid-up capital, and net worth. 
  • Features: Requires stricter compliance compared to small companies but enjoys certain benefits over larger corporations. 
  • Suitable for: Mid-sized businesses looking to scale operations while maintaining regulatory compliance. 

Types of Company based on Liability

• Limited Liability Partnership (LLP) 
  • Combines elements of partnerships and corporations, offering limited liability to its partners. 
  • Features: Partners are not personally liable for the debts of the LLP beyond their agreed contribution. 
  • Suitable for: Professional services firms, consultants, and small businesses where partners seek limited liability protection. 

• Partnership Firm 
  • An association of two or more people who share profits and losses. 
  • Features: Partners have unlimited liability, meaning personal assets can be used to settle business debts. 
  • Suitable for: Small businesses and professional firms where partners prefer shared control and responsibility. 

Types of Company based on Control

• Public Sector Undertakings (PSUs) 
  • Companies where most of the stake is held by the government. 
  • Features: Governed by specific regulations and policies aimed at promoting public welfare and economic growth. 
  • Suitable for: Industries crucial for national development and infrastructure projects. 

• Private Sector Companies 
  • Companies owned and controlled by private individuals or entities. 
  • Features: Operate based on profit motives and shareholder interests. Can be privately held or listed on stock exchanges. 
  • Suitable for: Diverse sectors including manufacturing, services, technology, and consumer goods. 

Types of Company based on Listing

• Listed Companies 
  • Companies that have their shares listed and actively traded on stock exchanges. 
  • Features: Subject to stringent regulatory requirements, including periodic financial reporting and disclosure. 
  • Suitable for: Companies seeking access to public capital markets and a broader investor base. 

• Unlisted Companies 
  • Companies that do not have their shares traded on stock exchanges. 
  • Features: Have flexibility in operations and less regulatory obligations compared to listed companies. 
  • Suitable for: Small to medium-sized enterprises and family-owned businesses preferring privacy and control over their operations. 

Types of Company based on Capital

• Equity Share Capital Companies 
  • Companies that raise capital by issuing equity shares to shareholders. 
  • Features: Shareholders participate in profits and losses, and voting rights are based on shareholding. 
  • Suitable for: Companies looking to raise funds from investors in exchange for ownership stakes. 

• Debenture Capital Companies 
  • Companies that raise capital by issuing debentures (debt instruments) to investors. 
  • Features: Debenture holders are creditors of the company and receive fixed interest payments. 
  • Suitable for: Companies needing additional funds without diluting ownership or control. 

Types of Company based on Ownership

• Foreign Companies 
  • Foreign companies are entities incorporated outside India but engage in business operations within the country. 
  • Ownership: Overseen by foreign stakeholders and management. 
  • Features: Must comply with Indian laws and regulations, including obtaining necessary permissions and approvals. 
  • Suitable for: Multinational corporations expanding into the Indian market, operating through subsidiaries or branch offices. 

• Associate Companies 
  • Associate companies are those where another company has significant influence but does not control the management decisions. 
  • Ownership: Shares common ownership or significant shareholding by a parent or holding company. 
  • Features: Generally aligned with the strategic interests of the parent company. 
  • Suitable for: Holding companies managing multiple subsidiaries with strategic partnerships. 

• Section 8 Companies 
  • Section 8 companies are established for promoting commerce, arts, science, sports, education, research, social welfare, religion, charity, or protection of the environment. 
  • Ownership: Governed by members and shareholders dedicated to promoting public welfare without aiming for profit distribution. 
  • Features: Enjoy tax exemptions and relaxed compliance norms for non-profit activities. 
  • Suitable for: Non-profit organizations and entities engaged in philanthropic or charitable activities. 

• Government Companies 
  • Government companies are entities in which the government holds most of the share capital. 
  • Ownership: Controlled and managed by governmental bodies or agencies. 
  • Features: Operate with public interest objectives, subjected to governmental policies and regulations. 
  • Suitable for: Industries crucial for national development and infrastructure projects, ensuring government control and accountability. 

• Dormant Companies 
  • Dormant companies are registered entities that are inactive with no significant accounting transactions. 
  • Ownership: Owned by shareholders who may choose to reactivate the company in the future. 
  • Features: Enjoy certain exemptions from regular compliance requirements but must maintain dormant status with updated filings. 
  • Suitable for: Companies temporarily inactive due to strategic reasons or awaiting market conditions for resumption of operations. 

Conclusion 

In conclusion, there are different types of companies in India under the Companies Act of 2013. This is crucial for establishing a solid legal foundation and achieving business goals effectively. Each type of company offers unique advantages and considerations based on factors such as number of members, liability, size, control, listing status, and capital requirements.  

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