Types of Companies in India

Companies form the backbone of India’s vibrant and dynamic economy, contributing significantly to its growth and development on both domestic and global fronts. From the bustling streets of Mumbai to the tech hubs of Bangalore, companies of all sizes and shapes dot the Indian subcontinent. 

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Companies in India are regulated by the Companies Act, which governs the incorporation, operation, management, and dissolution of companies. 

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In this blog, we will explore the various dimensions of company types in India and their classifications based on size, liability, listing status, and more. 

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<H2> Types of Companies Based on Members

Companies based on members typically pertain to the structure of ownership or number of shareholders within the company. In this context, companies can be categorized based on the number of individuals or entities that hold ownership or membership in the company. 

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Here are the main types of companies based on members:

<H3> Private Limited Company

Private Limited Company (Pvt Ltd) is one of the most common and preferred forms of business entities in India, particularly for small to medium-sized enterprises (SMEs) and startups. This corporate structure offers several advantages that make it an attractive choice for entrepreneurs and investors alike.

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Furthermore, Pvt Ltd companies have access to various funding sources, including equity financing, debt financing, and venture capital investment. The ability to issue shares to investors enables Pvt Ltd companies to raise capital for expansion, innovation, and strategic initiatives, fueling growth and competitiveness.

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<H3> One Person Company

At its core, an One Person Company is a hybrid entity that combines the benefits of a sole proprietorship with the advantages of a private limited company. It enables you to establish a separate legal entity as a single individual for your business activities, shielding personal assets from business liabilities. 

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<H3> Public Limited Company

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A Public Limited Company represents a dynamic and robust business entity widely recognized for its scalability, transparency, and access to capital markets.

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One of the primary advantages of a Public Limited Company is the ability to raise capital through public offerings of shares and debentures. 

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By issuing shares to the public, you can attract a diverse pool of investors, including institutional investors, retail investors, and financial institutions. This will facilitate substantial capital infusion for expansion, investment in new projects, and strategic acquisitions.

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<H3> Section 8 Company

Section 8 Company, also known as a Section 8 Company under the Companies Act 2013, is a unique form of non-profit organization (NPO) established for promoting charitable or not-for-profit objectives, such as education, art, science, religion, social welfare, environment conservation, and more.

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This legal structure is primarily designed for organizations engaged in activities for the promotion of social welfare or national interest without the intention of earning profits or dividends for its members.

Adding to the list of types of companies, there are other legal structures that aren’t considered companies but are equally important, such as-

• Limited Liability Partnerships
• Partnerships 
• Sole Proprietorships

<H2> Types of Companies Based on Size

In India, companies can be categorized based on their size, typically determined by factors such as turnover, capital investment, and employee count. Here are the main types of companies in India based on size:

1. <H3> Micro Enterprises

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Micro-enterprises are the smallest category of companies, characterized by low investment in plant and machinery or equipment. In India, micro-enterprises are defined as those with an investment of up to Rs. 1 crore in manufacturing and an annual turnover of Rs. 5 crore.

2. <H3> Small Enterprises

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Small enterprises are slightly larger than micro-enterprises but still fall within the small-scale sector. In India, small enterprises are defined as those with an investment of not more than Rs. 10 crore and an annual turnover of not more than Rs. 50 crore.

3. <H3> Medium Enterprises 

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Medium enterprises are larger than small enterprises but smaller than large corporations. In India, medium enterprises are defined as those with an investment of more than Rs. 50 crore in manufacturing and an annual turnover of not more than Rs. 250 crore. 

4. <H3> Large Enterprises 

Large enterprises are the largest category of companies, characterized by substantial investment, high turnover, and a large workforce. In India, large enterprises have investments exceeding Rs. 50 crore in manufacturing or Rs. 250 crore in services. They often have hundreds or even thousands of employees and operate nationally or multinational.

These categories are defined by the Ministry of Micro, Small, and Medium Enterprises (MSME) in India to provide various benefits and incentives to small and medium-sized enterprises (SMEs), such as priority lending, subsidies, tax exemptions, and easier access to government schemes and programs. 

<H2> Types of Companies Based on Liabilities

Companies can be categorized based on the extent of liability their members or owners have. Some major types of companies based on liabilities are-

1. <H3> Company Limited by Shares

A Company Limited by Shares is a type of company where the liability of its members is limited to the amount unpaid on their shares. This means that shareholders are not personally liable for the company's debts beyond the amount they have agreed to contribute towards the shares they hold. 

Companies Limited by Shares can be further classified into private limited companies and public limited companies based on the number of shareholders and other criteria.

2. <H3> Company Limited by Guarantee 

In a Company Limited by Guarantee, the liability of its members is limited to the amount they agree to contribute to the company's assets in the event of its winding up. This type of company is commonly used for non-profit organizations, clubs, societies, and associations.

3. <H3> Unlimited Liability Company

In an Unlimited Liability Company, the members or owners have unlimited personal liability for the company's debts and obligations. This means that their personal assets are at risk to satisfy the company's liabilities, and creditors can pursue the members' personal assets to settle debts owed by the company.

<H2> Types of Companies Based on Listing Status

Companies can also be classified based on their listing status, which refers to whether their shares are listed on a stock exchange for public trading. 

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1. <H3> Listed Companies

Listed companies are those whose shares are listed and traded on a recognized stock exchange, such as the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) in India. 

These companies are subject to stringent regulatory requirements and disclosure norms mandated by the Securities and Exchange Board of India (SEBI). Listing provides liquidity to shareholders and enables the company to raise capital by issuing additional shares to the public.

2. <H3> Unlisted Companies

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Unlisted companies are those whose shares are not traded on any stock exchange. These companies may be privately held, meaning that their shares are owned by a small group of shareholders or closely held by promoters and investors. 

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Unlisted companies are not subject to the same level of regulatory scrutiny as listed companies but may still be required to comply with certain statutory requirements under the Companies Act.

<H2> Types of Companies Based on Holding

Companies can be categorized based on their holding structure, which refers to the relationship between parent companies and their subsidiaries. 

1. <H3> Parent Company

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A parent company is a corporation that owns a controlling interest in one or more subsidiary companies. It typically holds more than 50% of the voting rights in the subsidiary companies and has the power to make decisions affecting their operations and strategic direction.

2. <H3> Subsidiary Company

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A subsidiary company is a company that is controlled by another company, known as the parent company. Subsidiary companies can be wholly or partially owned by the parent company, depending on the percentage of shares held. 

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Subsidiary companies operate independently but are subject to the control and influence of the parent company.

3. <H3> Holdings Company

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A holdings company is a company whose primary purpose is to hold investments in other companies rather than engage in operational activities. Holdings companies typically own shares in subsidiary companies and may provide their subsidiaries with strategic direction and financial support.

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Unlike a parent company, a holding company does not engage in business operations of its own.

4. <H3> Affiliate Company

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An affiliate company is a company that is related to another company through common ownership or control. Affiliate companies may be part of the same corporate group or have a strategic partnership with each other.  

5. <H3> Associate Company

An associate company is one in which another company holds a significant but not controlling interest, usually between 20% to 50% of the voting rights. While the investing company has influence over the associate company's operations and management, it does not exercise full control.

In conclusion, from sole proprietorships and partnerships to corporations and joint ventures, each type of company offers distinct advantages and considerations suited to various business needs and objectives. As the business landscape continues evolving, choosing the right company type cannot be overstated.

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