Appointment of Company Secretary: Roles and Responsibilities Explained

What Are the Types of Business Entities?

India’s vibrant economy is home to diverse industries and entrepreneurial ambitions, necessitating a range of business entity options. From solo ventures to large-scale collaborations, the choice of business structure directly impacts a company's growth, legal compliance, tax obligations and operational efficiency.

There are different types of companies in India, ranging from individual ownership models to multi-member organisations, catering to various needs and scales. These include:

• Sole Proprietorship
  
• Limited Liability Partnerships (LLP)
  
• Private Limited Companies
  
• One Person Companies (OPC)
  
• Section 8 Companies
• Partnerships
• Public Limited Companies
• Joint-Venture Companies
• Non-Government Organisations (NGOs)

Types of Business Structures in India

India offers a variety of business structures to suit different entrepreneurial needs, scales and industries. Each structure has unique features, benefits and drawbacks, making it crucial to choose the right one based on your business goals. Let’s dive deeper into different types of businesses in India:

1. Sole ProprietorshipA sole proprietorship is the simplest and most commonly adopted business structure in India, especially for small businesses or individual entrepreneurs. It is an unincorporated business owned and managed by a single person.
   Features:
   
   • No separate legal entity; the business is considered the same as the owner.
   • Unlimited liability: The owner's personal assets are at risk in case of debts.
   • Minimal compliance: Easy to set up and operate with fewer regulations.
2. PartnershipA partnership is a business structure where two or more individuals share ownership, profits and responsibilities. It is governed by the Indian Partnership Act of 1932 and is ideal for businesses requiring diverse skill sets.
   Features:
   
   • Joint ownership and decision-making.
   • Unlimited liability for all partners unless specified otherwise in the partnership agreement.
   • No perpetual succession; the partnership dissolves upon a partner's death or withdrawal.
3. Limited Liability Partnerships (LLP)An LLP blends the advantages of a partnership with the benefits of limited liability. Introduced under the LLP Act of 2008, it is ideal for professionals or small businesses looking for a flexible yet secure structure.
   Features:
   
   • Combines the flexibility of partnerships with limited liability protection.
   • A separate legal entity from its partners.
   • Requires at least two designated partners.
4. Private Limited Companies (Pvt Ltd)A Private Limited Company is a favoured structure among startups and small-to-medium enterprises with several advantages. It is governed by the Companies Act of 2013 and allows for limited liability while offering scalability.
   Features:
   
   • Separate legal identity from its owners.
   • Limited liability for shareholders.
   • Eligibility to issue shares for raising funds.
5. Public Limited CompaniesA Public Limited Company is suitable for businesses aiming to scale operations and raise public funds through shares. A company whose shares are publicly traded, with ownership open to the general public.
   Features:
   
   • Requires a minimum of seven shareholders and three directors.
   • No upper limit on the number of shareholders.
   • Vulnerable to market fluctuations.
6. One Person Companies (OPC)Introduced under the Companies Act of 2013, an OPC caters to solo entrepreneurs seeking limited liability benefits. Simply put, a single individual owns the company while enjoying limited liability protection.
   Features:
   
   • Mandatory to appoint a nominee.
   • Limited liability for the owner.
   • Not eligible for equity funding.
7. Section 8 Companies (NGOs)Section 8 Companies are nonprofit organisations formed under the Companies Act of 2013 to promote social welfare activities. These companies focus on charitable objectives like education, healthcare or environmental protection.
   Features:
   
   • Profits cannot be distributed as dividends.
   • Tax exemptions are available under specific conditions.
8. Joint-Venture CompaniesA Joint- Venture (JV) combines two or more entities to collaborate on a specific project or goal. Partners share resources, expertise and profits while retaining their individual entities.
   Features:
   
   • Operates under a joint agreement for a specific purpose.
   • Temporary or long-term collaboration.
   • Shared financial risks.
9. Non-Government Organisations (NGOs)NGOs are entities dedicated to social welfare causes, operating independently of the government. NGOs can be structured as trusts, societies or Section 8 Companies, focusing on various charitable activities.
   Features:
   
   • Operates without a profit motive.
   • May qualify for tax exemptions.
   • Drives social change and community development.

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:

Here are the main types of companies based on members:

1. Micro Enterprises

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. Small Enterprises

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. Medium Enterprises

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. 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.

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. 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. 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. 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.

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.

1. 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. Unlisted Companies

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.

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.

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. Parent Company

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. Subsidiary Company

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.

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

3. Holdings Company

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.

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

4. Affiliate Company

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. 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.

Documents Required to Open Different Types of Business in India

Here’s a list of documents required to open a company in India:

• Identity Proof: PAN card, Aadhaar card
• Address Proof: Utility bill, rent agreement, or property papers
• Business Registration Forms: Forms based on the business type (SPICe+, FiLLiP, etc.)
• Digital Signature Certificate (DSC): For online submissions
• Proof of registered office address: NOC or Rental Agreement

Additional documents may be required based on the business type, such as MOA and AOA for companies, LLP Agreements for LLPs or trust deeds for NGOs.

Conclusion

In India, the variety of business entities ensures there’s a fit for every kind of entrepreneur—whether you're a solo dreamer with a big vision, a small team building something impactful, or an organisation driven by social change.

Each type of entity offers unique features, advantages and challenges. From the simplicity of a sole proprietorship to the robust framework of private limited companies or the flexibility of LLPs, picking the right one can make your journey smoother, protect your personal assets and set you up for growth.

Think about your business goals:

• Do you want to stay small and agile or scale into a large organisation?
• Do you need investors or want to keep it self-funded?
• Are compliance and taxes manageable?

Your answers to these questions will guide you toward the perfect fit. If you’re unsure where to start, don’t worry—many successful entrepreneurs were in the same place when they started. The key is to take it one step at a time.

Frequently Asked Questions

What is Form ADT-1?

Form ADT-1 is a mandatory filing under the Companies Act, 2013, used to inform the Registrar of Companies (ROC) about the appointment of an auditor in a company.

Key Points on Auditor Appointment & Filing Requirements

1. Appointment of First Auditor (New Companies)

For companies (excluding government companies):

The Board of Directors must appoint the first auditor within 30 days of incorporation.

If the Board fails to do so, the members must appoint the first auditor within 90 days at an Extraordinary General Meeting (EGM).

The first auditor holds office until the conclusion of the first Annual General Meeting (AGM).

Note: Filing Form ADT-1 is NOT required for the first auditor’s appointment. However, companies may choose to file it for compliance and record-keeping purposes.

2. Appointment of Subsequent Auditors

After the first AGM, companies must appoint an auditor for a five-year term (for private and public companies) or as per shareholder approval.

Form ADT-1 must be filed within 15 days of the auditor’s appointment to inform the ROC.

Timely filing of Form ADT-1 is crucial for companies to:

• Comply with legal requirements under the Companies Act
  
• Avoid penalties and legal consequences
  
• Maintain transparency in auditor appointments
  
• Ensure proper oversight of financial reporting
  

Who Needs to File Form ADT-1?

Is Form ADT-1 mandatory for all companies?

All companies incorporated under the Companies Act, 2013, are required to file Form ADT-1, including:

• Private Limited Companies
  
• Public Limited Companies
  
• One Person Companies (OPCs)
  
• Small Companies
  
• Dormant Companies
  

What happens if a company fails to file Form ADT-1?

Failure to file Form ADT-1 within the prescribed time can result in penalties and legal consequences for the company and its directors. The company may be fined between ₹25,000 to ₹5,00,000, and every defaulting officer may be punishable with imprisonment of up to 1 year, a fine between ₹10,000 to ₹1,00,000, or both.

Law Governing the Form ADT-1

The filing of Form ADT-1 is mandated under Section 139(1) of the Companies Act, 2013. This section requires companies to file the form with the ROC to inform them about the auditor's appointment, which is done after the AGM. The form contains essential details about the appointed auditor, such as their name, address, membership number, and date of appointment. Companies must submit Form ADT-1 within 15 days of the AGM to fulfil their legal obligations and avoid potential penalties for non-compliance.

Requirements for Filing Form ADT-1

• The company has appointed an auditor as per the provisions of the Companies Act, 2013
  
• The appointed auditor has provided written consent to act as the auditor
  
• The auditor has issued a certificate confirming they are not disqualified under Section 141 of the Act
  
• The company has obtained a Director Identification Number (DIN) for the signing director
  
• The signatory has a valid Digital Signature Certificate (DSC)
  

Companies must attach the necessary supporting documents, such as the board resolution for auditor appointment, auditor's consent letter, and certificate of eligibility while filing the form. Failing to meet these requirements can lead to the rejection of the form by the ROC.

Fees for Filing Form ADT-1

The filing fees for Form ADT-1 depend on the company's authorised share capital, as per the table below:

For LLP Companies without share capital, the filing fee is a flat ₹200.

Late filing of Form ADT-1 attracts additional fees, which increase based on the delay duration:

• Up to 30 days delay: 2 times the normal fees
• 31 to 60 days delay: 4 times the normal fees
  
• 61 to 90 days delay: 6 times the normal fees
  
• 91 to 180 days delay: 10 times the normal fees
  
• More than 180 days delay: 12 times the normal fees
  

Due Date For Filing MCA Form ADT-1

The due date for filing Form ADT-1 depends on whether the company is newly incorporated or existing:

For newly incorporated companies:

• ADT-1 for the first auditor must be filed within 15 days of the first Board Meeting
• This Board Meeting must be held within 30 days of incorporation, where the first auditor is appointed
  

For existing companies:

• Form ADT-1 should be filed within 15 days of the AGM where the auditor was appointed or reappointed
• Example: If the AGM was held on September 30, 2023, the ADT-1 due date would be October 14, 2023
  

While filing the form, companies must provide the following details about the appointed auditor:

1. Auditor's category (individual or firm)
2. Membership number of the auditor or firm's registration number
   
3. Address and email ID of the auditor
   
4. Permanent Account Number (PAN) of the auditor
   
5. Period of appointment
   
6. Membership number of the previous auditor in case of vacancy
   
7. Date of appointment and AGM date
   
8. Details of any casual vacancy (date and reason)
   

Along with these details, companies must attach the following supporting documents:

1. Certified copy of the Board Resolution for auditor appointment
2. Written consent of the auditor to act as such
   
3. Certificate by the auditor confirming their eligibility under Section 141
   
4. Copy of the intimation letter sent by the company to the auditor regarding their appointment
   

Penalty on Delayed Filing of Form ADT-1

Delayed filing of Form ADT-1 attracts penalties, which increase based on the duration of the delay:

• Up to 30 days delay: Twice the normal filing fees
• 31 to 60 days delay: Four times the normal filing fees
  
• 61 to 90 days delay: Six times the normal filing fees
  
• 91 to 180 days delay: Ten times the normal filing fees
  
• More than 180 days delay: Twelve times the normal filing fees
  

Companies must be mindful of the ADT-1 due date and ensure timely filing to avoid these escalating penalty fees. Repeated non-compliance can also lead to more severe consequences, such as fines and legal action against the company and its officers.

Important Points to Consider Regarding Form ADT-1

• Filing Form ADT-1 is mandatory for all types of companies, including private, public, and one-person companies.
• The responsibility of filing the form lies with the company and its directors, not the auditor.
  
• Form ADT-1 must be filed even in case of filling casual vacancies in the auditor's office.
  
• Companies should file Form ADT-1 for the appointment of the first auditor as well.
  
• Timely filing of the form with all necessary details and documents is crucial to avoid penalties and legal complications.
  

Process for Filing Form ADT-1

1. Obtain a Digital Signature Certificate (DSC) for at least one Director of the company from a licensed Certifying Authority
2. Ensure the signing director has a valid Director Identification Number (DIN)
   
3. Download Form ADT-1 from the MCA portal
   
4. Fill in the required company and auditor details accurately
   
5. Attach the necessary supporting documents (Board Resolution, auditor consent, eligibility certificate, etc.)
   
6. Verify the form using the director's DSC
   
7. Submit the form electronically on the MCA portal
   
8. Pay the requisite filing fees online using a credit card, debit card, or net banking
   
9. Receive an acknowledgement email from MCA as proof of filing
   

Frequently Asked Questions

Why Start a Business in India as a Foreigner?

India offers a compelling value proposition for global business owners:

• Fast-growing economy: India is among the top emerging markets with consistent GDP growth.
  
  
• Large consumer base: With over 1.4 billion people and a rising middle class, the domestic market is vast and varied.
  
  
• Startup-friendly policies: Programs like Startup India, Make in India, and Digital India support new ventures with tax benefits, funding access, and ease of registration.
  
  
• Improved ease of doing business: Recent reforms have simplified company incorporation, tax filing, and compliance.
  
  
• Strategic location: India’s proximity to other Asian markets makes it a strong base for regional operations.
  
  
• Skilled talent: A large English-speaking, tech-savvy workforce makes it easier to scale.
  
  
• Cost-effective operations: Lower labour and operational costs compared to many developed markets.

Additionally, FDI relaxations across sectors like tech, manufacturing, and services have made India a preferred destination for companies like Amazon, IKEA, and Walmart.

Popular Business Structures for Foreigners in India

Foreign nationals looking to start a business in India can choose from a few key structures:

• Private Limited Company (Pvt Ltd): Most preferred structure; allows 100% FDI in most sectors.
• Limited Liability Partnership (LLP): Suitable for service businesses and professional firms; FDI permitted in select cases.
• Liaison Office: Ideal for companies wanting to explore or represent without full operations.
• Branch Office: Allows foreign companies to conduct full-scale business in India.
• Project Office: Meant for foreign companies executing specific projects.

Note: One Person Company (OPC) and sole proprietorships are not allowed for foreign nationals or NRIs due to FDI restrictions.

Looking to register a business in India? Explore private limited company or LLP options with expert help today.”

Type of Company that NRIs and Foreign Nationals Can Register

While OPC is off the table, foreign nationals and NRIs can register the following:

• Private Limited Company
• Public Limited Company
• Limited Liability Partnership (LLP) – subject to FDI conditions

Under automatic FDI routes, many sectors do not require prior government approval for investment. However, some sectors are still under the approval route or have FDI caps.

The Private Limited Company remains the most flexible and founder-friendly choice, especially for technology, services, and product-based businesses.

Can a Foreigner Own 100% of an Indian Company?

Yes! Foreign nationals can own 100% of equity in Indian companies, provided the business operates in a sector under the automatic FDI route. This means:

• No need for government approval in most sectors.
• A resident Indian director is mandatory (must stay in India for at least 182 days in a financial year).
• Some sectors like defence, telecom, and insurance have FDI caps or require prior approvals.

Pre-requisites for Registration of a Private or Public Limited Company

Private Limited Company:

• Minimum 2 shareholders and 2 directors
• At least 1 Indian resident director
• Registered office address in India
• Digital Signature Certificate (DSC) for all directors
• Company name approval from the MCA

Public Limited Company:

• Minimum 7 shareholders and 3 directors
• Other requirements same as above

For foreign nationals, documents must be apostilled or notarised as per regulatory norms.

Documents Required for Foreign Directors & Shareholders

Foreign nationals need to submit the following documents:

• Passport (identity proof): notarised/apostilled
• Address Proof (bank statement, utility bill, not older than 2 months)
• Passport-size photograph
• Digital Signature Certificate (DSC) application form, duly signed
• Board resolution or power of attorney (in case of a foreign entity shareholder)

If applicable:

• PAN Card (mandatory for directors earning income in India)

 Process to Register a Company in India as a Foreigner

1. Obtain DSCs for all proposed directors
2. Apply for name approval on the MCA portal
3. Draft incorporation documents (MoA, AoA, declarations, etc.)
4. File incorporation application online via SPICe+ form
5. Receive Certificate of Incorporation from MCA
6. Apply for:
   
   • PAN & TAN
   • GST Registration (if applicable)
   • Bank account in the company’s name
     
     

Note: One resident Indian director is compulsory.

Taxation for Foreign-Owned Companies in India

Companies registered in India (even if foreign-owned) are treated as domestic companies for tax purposes:

• Corporate Tax: 25% (plus cess and surcharge) if turnover ≤ ₹400 crore
  
  
• GST: Mandatory if turnover exceeds ₹20 lakh (or if interstate services are provided)
  
  
• TDS: Deduction obligations apply when making payments to employees, contractors, or foreign entities
  
  
• Transfer Pricing Regulations: Apply for transactions with foreign affiliates or holding companies
  
  

India has Double Tax Avoidance Agreements (DTAAs) with many countries to reduce tax burden.

Company Types for Foreign Nationals

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Conclusion

While foreign nationals cannot register an OPC in India due to FDI restrictions, there are multiple flexible options available with the Private Limited Company being the most recommended. With the right legal support and compliance, India offers a rich, growth-oriented environment for foreign entrepreneurs to launch and scale their ventures.

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