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Business Types

Company

  • The ‘Company’ form of organisation is the most common business structure in India.
  •  Company Registration in India is regulated by the Companies’ Act of 1956. It is administered by the  Ministry of Corporate Affairs (www.mca.gov.in) through the Registrar of Companies (ROC) in each state.
  •  Types of companies that can be registered in India - Private Companies and Public Companies.

Minimum Capital Requirements for Registration:

  •   Private Company - Rs. 1 Lakh.
  • Public Company - Rs. 5 Lakhs.

Members and Directors Requirement for Registration:

  •  Private Company  -    Minimum of 2 members and 2 directors.

                     Maximum of 50 members.

  •    Public Company -    Minimum of 7 members and 3 directors.

                                     Maximum - no restriction.

LLP

  •  A Limited Liability Partnership is a partnership in which some or all of the partners have limited liability. A LLP is an incorporated business form that has the features of both partnerships and companies such as perpetual succession, common seal, legal personality, limited liability, etc.
  •   This type of organisation was introduced in India in 2008.
  •    Minimum capital requirement for registration is Re.1.
  •   Member requirement for registration is 2 designated partners, one of whom should be a resident in India.

Partnership

  •   The partnership form of organisation is one of the oldest forms of business in India. It is governed by the Indian Partnership Act of 1932.
  •    A partnership is a special type of contract and is a relation between two or more persons who have agreed to share profits of a business run by all or any one of them acting for all. Each partner is liable for the actions of all the other partners.
  •  Any two people who are capable of entering into a contract can start a partnership business under an agreement called a partnership deed. The partnership agreement can be oral or written.
  •    It is not mandatory to register a partnership deed, but it is advisable to do so since a firm cannot file a suit against a third party if it is unregistered.

Sole Proprietorship

  •     A sole proprietorship is a business owned, operated and managed by a single individual.
  •  Sole proprietorship is not a legal entity and does not have a status separate from its owner. The owner receives all profits (after tax) and has unlimited responsibility for all losses and debts.
  •  The owner's personal assets are at risk to compensate for the business liabilities.
  •   There are no special laws for registering a sole proprietorship in India.
  •  Even though registration is not essential, the owner has to obtain the necessary licenses specific to his/her line of business such as Shops & Establishments, Professional Tax, Service Tax, VAT,etc.

Section 25 Company

  •   A company that is formed not for making profits falls under the purview of Section 25 of the Companies Act of 1956.
  •   Such companies are formed to promote commerce, science, art, religion, charity and other socially relevant objectives.
  •   These companies need not use the words Limited or Private Limited after their name and are generally registered as Guarantee Company with limited liability with or without capital. Such companies can be private or public depending on the number of persons involved.
  •  The surplus of receipts over payments should be applied only for the promotion of the objectives of such company.
  •    In case of winding up of a Section 25 company, the assets remaining after clearing all debts and liabilities should not be distributed amongst members of the company. Instead, it should be given or transferred to other companies having similar objectives as may be determined by the members or the High Court in the process of winding up.

                          for comparison among the various types of businesses is given in a tabular form click here: