To start any business in India legally, you need to have business entity registration. Business Entity Registration allows you to choose the business owners, taxation, compliances, benefits, etc. Therefore, one of the primary decisions that you need to make before starting any business is to choose company formation. In India, you get to register the company from seven types of registrations. Knowing about the 7 types of Company Registration in India will help you make the right decision for your business. In this article, you will explore the 7 types of Company Registration in India.
What is Company Formation?
The “Companies Act of 2013” divides enterprises into numerous groups based on their size, the number of workers, liability, access to financing, and other factors.
Any legal organization founded and controlled under the Companies Act of 2013 is referred to as a “company.”
Hence, Company Formation is the legal procedure to form a business entity that can commence and operate a business.
Why Company Formation in India is Important?
The organizational structure you choose will impact everything in your business including the taxes you pay to the compliance processes you follow and the eligibility standards you must meet.
As a result, deciding the type of Company Formation in India is one of the most important decisions a business owner has to make.
Learn about the 7 types of Company Registration in India
Sole Proprietorship Registration
A sole proprietorship registration is a company registration in which the business is managed by a single person. The firm and its operator are treated as a single entity. Furthermore, earnings and liabilities are completely the responsibility of the owner or operator. Because the owners’ names appear on the sole proprietorship registration, they will also appear on ITR Filing, GST Registration, and on bookkeeping and accounting resulting in infinite corporate liability.
Simply put, In most sole proprietorship businesses, the owner is personally liable for all earnings and risks.
Benefits of Sole Proprietorship Registration
- It is easy to have Sole Proprietorship Registration online.
- You get independent decision-making power.
- You can choose any business name as per your choice.
One Person Company Registration
A single individual must be designated as a director in one-person company registration. In other words, the single individual will be the director as well as a member or shareholder.
It is similar to a sole proprietorship. However, A shareholder’s liabilities and responsibilities in One Person Company Registration can be reduced to a certain extent.
To put it another way, One Person Company is a corporation or business entity whose director and member are the same human. As a result, the firm’s operations will be managed by a single person without having all the personal liabilities.
Benefits of One Person Company Registration
- You get the limited liability but remain the single owner.
- Easily transfer your ownership or equity to another person.
- Lesser Compliances as compared to other types of Companies Registration in India.
Partnership Firm Registration
In a partnership, business activities are coordinated by two or more partners who already have determined their role and profit-sharing. For a Partnership Firm Registration, you have to use a binding agreement referred to as the partnership deed. In partnership firm registration, the tasks, obligations, responsibilities, and amount of shares owned are all expressly outlined.
Benefits of Partnership Firm Registration
- Your business gets more credibility as compared to Partnership Firm not having registration.
- Easy to form and Easy to wind-up
- You can save more on taxes as compared to sole proprietorship registration.
LLP Company Registration
LLP stands for Limited Liability Partnership. LLP Registration is similar to Partnership Firm Registration. However, it offers you limited liability.
In simple words, your personal assets are independent of the LLP Company’s Assets. Hence, your personal assets are not at risk. You can also say that it is the corporate form of a Partnership Firm.
The partners are liable as per their initial capital investment and thus one partner is not responsible for other partners’ mistakes.
Benefits of LLP Registration
- Your personal assets are safe.
- Easy to operate business and change partners.
- No minimum capital requirement for LLP Company Registration. Furthermore, no audit requirement till annual turnover exceeds Rs.40 Lakhs.
Private Limited Company Registration
Private Limited Company Registration is ideal for enterprises that require private business entities. To safeguard their own assets, a group of shareholders divides the liabilities on themselves in this form of business. Holdings in such a firm cannot be exchanged or distributed publicly.
Benefits of Private Limited Company Registration
- Investors and even banks prefer companies for funding that have Private Limited Company Registration.
- The liability is minimum and the chances of dissolving a company are minimum.
- Continues to exist even if directors change.
Public Limited Company Registration
Public Limited Company Registration is similar to Private Limited Company Registration. However, the only difference is that you can publicly list the shares of the company in the stock market. Hence, it allows the transfer of shares from one member to another.
Benefits of Public Limited Company Registration
- Easily Raise funds from the public
- No limit on the number of shareholders
- Offers the company to have its own property rights
Section 8 Company Registration
Non-Profit Organizations, or NGOs, are the most prevalent term for these organizations, which are involved in charitable endeavors. These organizations’ main goals are to promote the arts, sciences, and learning, fight climate change, and provide assistance to those in need.
An NGO must have at least two owners and directors in order to be registered.
Benefits of Section 8 Company Registration
- Section 8 business organizations are exempt from paying income taxes since they are non-profit organizations. In essence, they are excluded from having to pay tax under certain criteria.
- A section 8 business, in contrast to a limited corporation, is exempt from the need for authorized capital.
- Section 8 Company’s name does not need to conclude with “limited company.” This sort of business isn’t needed to use a title at all.
Download E-Startup Mobile App and Never miss the latest updates narrating to your business.