Difference Between Businessman and Entrepreneur: Which Path is Right For You?

Mar 27, 2025
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The terms "businessman" and "entrepreneur" are often used interchangeably, but there are distinct differences between the two. Understanding these differences between entrepreneur and businessman can help you determine which path aligns best with your skills, ambitions, and vision for success. In this article, we'll explore the key differences between a businessman and an entrepreneur, examining their mindset, risk-taking approach, and business goals. While a businessman typically follows an established model, an entrepreneur creates something new and innovative. Let's delve deeper into the difference between entrepreneur and business man to help you make an informed decision about your career path.

Table of Contents

Entrepreneur Vs Businessman: Know the Differences Now!

To clearly understand the difference between entrepreneur and business man, let's compare their key characteristics:

Aspect Entrepreneur Businessman
Definition Starts an enterprise based on a new idea or concept Sets up a business with an existing idea
Innovation Constantly works towards innovation in products, business models, and marketing strategies Focuses on executing known business ideas and models
Risk-taking Willing to take greater risks for higher rewards Takes calculated risks and prefers tested methods
Motivation Driven by the desire to innovate, create, and make an impact Primarily motivated by making money and generating profits
Approach Unconventional; creates new markets and explores uncharted territories Conventional; operates based on existing market conditions
Resources Usually starts with limited resources and arranges them along the way Mostly starts with adequate capital and business skills
Competition Aims to make competition irrelevant by creating new uncontested market spaces Tries to capture market share from existing players
Growth Always looking for rapid and significant growth Satisfied with slow and steady growth as long as the business remains profitable

By examining these key differences, you can begin to understand the distinct mindsets and approaches that define an entrepreneur and a businessman. While entrepreneurs bring innovation and disruption to industries, businessmen excel at optimising existing models for profitability and longevity.

Who is a Businessman?

A businessman is an individual who operates within the confines of an existing market, focusing on profitability and stability. They typically follow proven business models, work with lower risks, and aim for steady growth rather than groundbreaking innovation. Businessmen are skilled at identifying opportunities within established industries and leveraging their expertise to maximise returns.

Qualities of a Businessman

To succeed as a businessman, one must possess a unique set of qualities that enable them to navigate the challenges of running a business effectively. Some of the essential qualities of a successful businessman include:

  • Strong decision-making skills to navigate complex business situations
  • Effective risk management to minimise potential losses
  • Excellent leadership abilities to guide teams towards common goals
  • Financial acumen to optimise budgets and maximise profits
  • Adaptability to changing market conditions and consumer demands

A businessman with these qualities can effectively steer their organisation towards profitability, make sound financial decisions, and lead their team to achieve targets and milestones.

Types of Businessman

Businessmen can be categorised based on their business model and operations. Some common types of businessmen include:

  • Small Business Owners: These individuals own and operate small-scale businesses, often in local markets or niche industries.
  • Traders: Businessmen who engage in buying and selling goods or services for profit, often in wholesale or retail markets.
  • Manufacturers: Those who own and manage manufacturing facilities, producing goods for sale to other businesses or consumers.
  • Franchise Owners: Businessmen who operate a business under a franchising agreement, following established business models and brand guidelines.
  • Corporate Businessmen: High-level executives or managers within large corporations, responsible for overseeing departments or entire business units.

Each type of businessman contributes to the economy in their own way, whether by providing employment opportunities, generating revenue, or contributing to the overall growth of their industry.

Who is an Entrepreneur?

An entrepreneur is an individual who identifies a problem or opportunity, takes on the risk of starting a new venture to address it, and comes up with innovative ideas to disrupt the market. Entrepreneurs are driven by a passion for solving problems and creating value, often venturing into uncharted territories to bring their vision to life.

Entrepreneurs focus on building scalable businesses from the ground up, constantly seeking new ways to innovate and improve upon existing solutions. They are not afraid to challenge the status quo and take bold risks in pursuit of their goals. Some famous examples of entrepreneurs include Bill Gates (Microsoft), Steve Jobs (Apple), Elon Musk (Tesla, SpaceX), and Jeff Bezos (Amazon), all of whom founded highly innovative companies that revolutionised entire industries.

Qualities of an Entrepreneur

Successful entrepreneurs possess a distinct set of qualities that enable them to navigate the challenges of starting and growing a business. Some of the key qualities of an entrepreneur include:

  • Innovative thinking to come up with original, impactful ideas
  • Comfort with taking risks to bring unproven concepts to market
  • Resilience to overcome the many challenges of starting a business
  • Strong leadership skills to build and inspire talented teams
  • Adaptability to pivot business strategies as needed
  • Creative problem-solving abilities to navigate uncharted territory

These qualities help entrepreneurs blaze new trails and create value in the world.

Entrepreneurs with these qualities are well-equipped to identify market gaps, develop unique solutions, and persevere through the ups and downs of building a successful venture.

Types of Entrepreneur

Entrepreneurs can be classified based on their approach, industry, and level of innovation. Some common types of entrepreneurs include:

  • Small Business Entrepreneurs: These individuals start and run small businesses, often serving local markets or niche industries.
  • Scalable Startup Entrepreneurs: Entrepreneurs who focus on building high-growth, innovative companies with the potential to scale rapidly and disrupt markets.
  • Social Entrepreneurs: Those who start ventures with the primary goal of creating social or environmental impact, often addressing pressing societal issues.
  • Corporate Entrepreneurs (Intrapreneurs): Entrepreneurs who operate within large corporations, driving innovation and new business development from within.
  • Innovative Entrepreneurs: Entrepreneurs who consistently push the boundaries of their industries, introducing groundbreaking products, services, or business models.

Each type of entrepreneur brings a unique perspective and set of skills to the table, contributing to the overall diversity and dynamism of the business world.

Similarities Between Entrepreneurs and Businessmen

Despite their differences, entrepreneurs and businessmen share some common traits and characteristics that contribute to their success. These similarities include:

  1. Leadership skills: Both roles require the ability to lead and motivate teams, set goals, and make critical decisions.
  2. Goal orientation: Entrepreneurs and businessmen are driven by their goals, whether it's building a successful startup or growing an established company.
  3. Financial management: Both must be skilled at managing finances, creating budgets, and making sound financial decisions.
  4. Market understanding: A deep understanding of their target market, customer needs, and industry trends is essential for both entrepreneurs and businessmen.

While their approaches may differ, both entrepreneurs and businessmen play crucial roles in driving economic growth, creating jobs, and generating value for their stakeholders. Recognising these shared traits can help aspiring entrepreneurs and businessmen focus on developing the skills and qualities that are most likely to contribute to their success, regardless of the path they choose.

Final Thoughts

Choosing between the path of an entrepreneur or a businessman ultimately depends on your individual goals, risk appetite, and preferred work style. If you thrive on stability, have strong management skills, and prefer working with established business models, the path of a businessman may be right for you. On the other hand, if you're a passionate risk-taker with a drive to solve problems and disrupt industries with innovative ideas, entrepreneurship could be your calling.

Regardless of the path you choose, understanding the difference between a businessman and an entrepreneur is crucial in aligning your skills and passions with your professional goals. By recognising the key differences between entrepreneur and business man, you can make an informed decision about which route best suits your unique strengths and aspirations.

Ultimately, both entrepreneurs and businessmen contribute significantly to the economy, and society needs each type to thrive. The key is to align your career path with your unique strengths, passions, and goals. Whether you choose to be an innovator or an optimiser, the business world offers endless opportunities for growth and success.

Frequently Asked Questions

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Frequently Asked Questions

Who is bigger-entrepreneur or businessman?

Neither entrepreneurs nor businessmen are inherently "bigger" than the other. The scale and impact of their ventures depend on various factors such as industry, market conditions, and individual success. Some entrepreneurs may build large, disruptive companies, while some businessmen may run highly successful, established corporations.

Is a businessman also called an entrepreneur?

While businessmen and entrepreneurs share some common traits, they are not necessarily the same. A businessman typically operates within established market frameworks, focusing on profitability and stability, while an entrepreneur is driven by innovation and takes risks to create new products, services, or markets.

What are the challenges of being an entrepreneur and a businessman?

Both entrepreneurs and businessmen face challenges in their respective roles. Entrepreneurs often face high risk, uncertainty, and the need to constantly innovate, while businessmen may struggle with adapting to changing market conditions, maintaining profitability, and managing complex operations.

Are businessmen and entrepreneurs equally focused on long-term goals?

Both businessmen and entrepreneurs have long-term goals, but their focus may differ. Entrepreneurs often prioritize building scalable, innovative companies with the potential for high growth, while businessmen may focus on steady, long-term profitability and market share within established industries.

Who is an example of an entrepreneur?

Some well-known examples of entrepreneurs include Steve Jobs (Apple), Bill Gates (Microsoft), Elon Musk (Tesla, SpaceX), Jeff Bezos (Amazon), and Mark Zuckerberg (Facebook). These individuals founded innovative companies that disrupted industries and created entirely new markets.

Who is an example of a businessman?

Examples of successful businessmen include Warren Buffett (Berkshire Hathaway), Mukesh Ambani (Reliance Industries), Ratan Tata (Tata Group), and Lakshmi Mittal (ArcelorMittal). These individuals have led and grown large, established companies, focusing on profitability and market dominance within their respective industries.

Eashita Maheshwary

With nearly a decade of building and nurturing strategic connections in D2C space, Eashita is a business growth strategist known for turning networks into revenue, relationships into partnerships, and ideas into actionable growth.

A three-time founder across gender diversity, investing, and real estate-hospitality sectors, Eashita Maheshwary brings a unique blend of entrepreneurial empathy and ecosystem expertise. Now focused on helping startups and businesses scale, she specializes in enabling growth through partnerships with a proven track record of working across geographies like India and the Middle East.

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What is a Shelf Prospectus? Meaning & Provisions Under the Companies Act, India

What is a Shelf Prospectus? Meaning & Provisions Under the Companies Act, India

A shelf prospectus is a legal document under the Companies Act of 2013 that allows a company to issue multiple rounds of securities without filing a new prospectus for each offering.

Once a company gets approval for a shelf prospectus, it can issue securities in tranches over a period (usually one year) without repeating the regulatory approval process. This mechanism is particularly beneficial for businesses that require frequent access to capital markets.

Simply put, a company gets approval for a prospectus and "shelves" it for use when needed. Just like a store keeps items on a shelf, ready to be picked up when required, companies can tap into their shelf prospectus whenever they decide to issue securities within the approved period.

Table of Contents

Shelf Prospectus Meaning

A shelf prospectus is a document issued by companies intending to offer securities in multiple tranches over a specified period without filing a new prospectus for each offering. Governed by the Companies Act of 2013, it serves as a framework to streamline capital-raising activities while ensuring regulatory compliance.

This approach helps all types of companies save time and resources while maintaining transparency in financial disclosures.

What Is The Validity Period of Shelf Prospectus?

As per the Companies Act of 2013 and SEBI regulations, a shelf prospectus is valid for one year from the issue date. During this period, the company can make multiple security offerings without submitting a fresh prospectus.

However, an Information Memorandum must be filed for each subsequent offering to ensure updated financial and operational disclosures.

What Are The Requirements For Shelf Prospectus?

To issue a shelf prospectus, a company must fulfil specific requirements under the Companies Act, 2013:

  • Eligibility Criteria: The company must be a public financial institution, a bank, or a company notified by SEBI.
  • SEBI Approval: Approval from the Securities and Exchange Board of India (SEBI) is mandatory before issuance.
  • Financial Disclosures: The prospectus must include audited financial statements, business details, and risk factors.
  • Regulatory Compliance: The company must adhere to statutory provisions and filing requirements.

Who Can Issue Shelf Prospectus?

Not all companies are eligible to issue a shelf prospectus. As per SEBI regulations, only specific entities can do so, including:

  • Public Financial Institutions such as banks and NBFCs.
  • Scheduled Banks that meet regulatory criteria.
  • Other Companies notified by SEBI, provided they meet compliance standards.

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What Are The Eligibility Criteria For a Company to Issue a Shelf Prospectus?

To issue a shelf prospectus, a company must meet the following key eligibility criteria:

  • Strong Financial Performance: A consistent and positive financial track record is essential.
  • Regulatory Compliance: The company must have a history of timely filings and adherence to statutory norms.
  • Market Reputation: A credible and trustworthy market presence is necessary.
  • Clear Disclosure of Fund Utilization: The company must provide transparency regarding how the raised funds will be used.

5 Incredible Advantages of Shelf Prospectus

A shelf prospectus offers several benefits to companies and investors:

  1. Flexibility: Companies can issue securities as needed without additional regulatory approvals.
  2. Cost Efficiency: Reduces administrative and compliance costs associated with repeated filings.
  3. Faster Time to Market: Companies can respond quickly to market conditions.
  4. Improved Investor Relations: Provides transparency and trust through consistent financial disclosures.
  5. Strategic Financial Planning: Enables better capital-raising strategies over time.

How Does an Investor Benefit from a Shelf Prospectus?

Investors gain multiple advantages from a shelf prospectus:

  • Greater Transparency: A single document offers comprehensive details about the company.
  • Consistent Access to Securities: Investors can participate in multiple offerings from a single prospectus.
  • Time-Saving: Reduces the need to analyse multiple prospectuses for each security issuance.
  • Better Investment Planning: Enables informed decision-making with consistent financial disclosures.

Difference Between Shelf Prospectus and Red Herring Prospectus?

Parameter Shelf Prospectus Red Herring Prospectus
Purpose Used for multiple securities offerings over time Used for IPOs before the issue price is finalised
Validity Period Valid for one year from the issue date Valid only for a single IPO
Flexibility Allows multiple issuances without a new prospectus Only valid for a one-time offering
Information Contains comprehensive details about the company and financials Lacks finalised share price details
Regulatory Requirement Requires filing of Information Memorandum Needs SEBI approval before IPO launch

Financial Securities and Shelf Prospectus

A shelf prospectus allows companies to issue various types of financial securities, including:

  • Equity Shares: Ownership stakes in a company.
  • Debentures: Debt instruments issued by companies.
  • Bonds: Fixed-income securities providing periodic interest payments.

This streamlined approach reduces delays and administrative hurdles for issuing these securities over multiple tranches.

What Is an Information Memorandum?

An Information Memorandum is a document containing essential details about a company’s financials, operations, and business strategy. It is a key resource for investors, offering in-depth insights into the company's capital-raising plans.

When a company issues securities under a shelf prospectus, it must file an Information Memorandum before each offering to ensure updated and accurate disclosures.

Procedure to Fill Form PAS-2

Form PAS-2 is required to be filed as per the Companies (Prospectus and Allotment of Securities) Rules, 2014. Here’s how to fill it:

  1. Company Details: Enter the name, registered office, and CIN.
  2. Security Details: Specify the type and number of securities being offered.
  3. Offer Details: Mention the issue price, purpose, and utilisation of funds.
  4. Financial Statements: Attach recent audited financial reports.
  5. Declaration: Ensure proper authorisation and sign the form.

Procedure to Upload Form PAS-2

Once Form PAS-2 is completed, follow these steps to upload it to the MCA (Ministry of Corporate Affairs) portal:

  1. Prepare the Form: Ensure all required fields are filled out correctly and attach the necessary documents.
  2. Log in to the MCA Portal: Use company credentials to access the e-filing section.
  3. Upload the Form: Select Form PAS-2, attach supporting documents and verify details.
  4. Payment of Fees: Pay the prescribed filing fee through the portal.
  5. Submit and Confirm: After submission, a confirmation receipt and acknowledgement are generated.

Conclusion

For companies, a shelf prospectus eliminates the repetitive, time-consuming regulatory hurdles that come with multiple capital raises.

Instead of drafting and filing a new prospectus each time, businesses can plan their fundraising strategically, issuing securities when market conditions are favourable. This saves time, reduces administrative costs, and provides the flexibility needed to stay competitive.

For businesses, this means less paperwork, faster fundraising, and more flexibility to raise funds when needed. For investors, it provides greater transparency and clarity, helping them make better financial decisions.

By using a shelf prospectus wisely, companies can focus on growth, and investors can confidently explore opportunities—making it a win-win for everyone in the financial market.

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Frequently Asked Questions

What is meant by Shelf Prospectus?

A Shelf Prospectus is a type of prospectus that allows a company to issue securities in multiple tranches over a period of time without needing to file a separate prospectus for each offering. It provides flexibility for companies to raise funds as needed, reducing administrative burdens and costs.

What is Shelf Prospectus in Company Law Section 1?

In the context of Company Law (India - Companies Act, 2013, Section 31), a Shelf Prospectus is a prospectus issued by public financial institutions, banks, or listed companies for raising capital through multiple offerings. The prospectus remains valid for a specified period, and the company only needs to file an Information Memorandum before each tranche of issuance.

Does the Shelf Prospectus Require a Different Prospectus for Each Offering?

No, a Shelf Prospectus eliminates the need to file a separate prospectus for each offering. Instead, an Information Memorandum is submitted before each issuance, updating investors with relevant details about the specific tranche.

Is Shelf Prospectus Valid for Years?

In India, a Shelf Prospectus is typically valid for one year from the date of filing). Within this period, the company can issue securities in multiple tranches without filing a fresh prospectus each time.

Why Would a Company File a Base Shelf Prospectus?

A company files a Base Shelf Prospectus to:

  • Streamline Fundraising: Raise capital efficiently over time without repetitive regulatory approvals.
  • Reduce Costs: Minimize administrative and legal expenses associated with frequent filings.
  • Enhance Flexibility: Issue securities when market conditions are favourable.
  • Ensure Compliance: Maintain transparency while avoiding delays in capital raising.

Sarthak Goyal

Sarthak Goyal is a Chartered Accountant with 10+ years of experience in business process consulting, internal audits, risk management, and Virtual CFO services. He cleared his CA at 21, began his career in a PSU, and went on to establish a successful ₹8 Cr+ e-commerce venture.

He has since advised ₹200–1000 Cr+ companies on streamlining operations, setting up audit frameworks, and financial monitoring. A community builder for finance professionals and an amateur writer, Sarthak blends deep finance expertise with an entrepreneurial spirit and a passion for continuous learning.

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Promoters of a Company: Meaning, Roles, and Legal Responsibilities

Promoters of a Company: Meaning, Roles, and Legal Responsibilities

Behind every successful company lies the vision and initiative of its promoters—the individuals or entities responsible for bringing the business into existence. Promoters play a pivotal role in the early stages of a company's lifecycle, from conceptualising the business idea to ensuring its legal incorporation and securing initial funding.

Their responsibilities extend beyond just setting up the business; they lay the foundation for the company’s structure, compliance, and future growth. However, with great influence comes great responsibility, as promoters are entrusted with legal and ethical obligations to act in the best interests of the company and its stakeholders.

This blog dives into the meaning, types, roles, duties, and liabilities of company promoters, offering insights into their critical role in shaping successful businesses.

Table of Contents

Definition of Company Promoter

A company promoter is a person or entity that undertakes the responsibility of forming a company. As per legal definitions, a promoter is someone who conceives the idea of the business, takes the necessary steps to incorporate the company, and facilitates its registration.

For instance, if an individual drafts the Memorandum of Association (MOA) and Articles of Association (AOA) for a business and secures initial funding, they qualify as a promoter. Promoters can be:

  • Individuals (e.g., founders of a startup)
  • Groups of people (e.g., a partnership forming a company)
  • Organisations (e.g., a holding company promoting a subsidiary)

Who Are the Promoters of a Company?

Promoters can be anyone involved in the process of establishing a company. This includes:

  1. Founders – Entrepreneurs or individuals initiating the business idea.
  2. Investors – Entities that fund the company’s formation and help in structuring.
  3. Professional Firms – Companies that specialise in managing incorporation and initial stages.

It is important to differentiate between named promoters, whose roles are mentioned in legal documents like the prospectus, and unofficial contributors, who may assist without formal recognition.

Types of Promoters of a Company

Promoters can be classified based on their involvement and expertise:

1. Professional Promoters

These are specialists with expertise in company formation. For example, consulting firms or legal advisors assisting in setting up a company.

2. Occasional Promoters

Individuals who promote companies sporadically, typically when they spot a business opportunity, such as a seasoned entrepreneur launching a startup.

3. Financial Promoters

Entities like venture capitalists or investment firms promote businesses by providing initial funding.

4. Entrepreneurial Promoters

Business owners or founders who initiate the company based on their vision and strategy. An example is a tech founder creating a software startup.

Functions of a Promoter

The role of a promoter is multifaceted. Their primary functions include:

  1. Identifying a Business Opportunity
    Promoters analyse market trends, identify viable opportunities, and decide on the scope of the business.
  2. Preparing Necessary Documentation
    Drafting the MOA, AOA, and other legal documents essential for company registration.
  3. Securing Capital and Initial Funding
    Approaching investors or institutions to raise funds for the company.
  4. Registering the Company
    Ensuring the company’s incorporation by meeting all legal requirements, such as filing with the Registrar of Companies (RoC).
  5. Establishing Operations
    Setting up offices, hiring the initial workforce, and laying out the operational roadmap.

Duties of a Company Promoter

Promoters have critical duties to uphold the integrity and governance of a company. These include:

  1. Acting in Good Faith
    They must prioritise the company’s interests over personal gain.
  2. Avoiding Conflicts of Interest
    Promoters are obligated to disclose any potential conflicts that may affect the company.
  3. Disclosure of Personal Interests
    Any benefits or transactions involving the promoter must be transparently disclosed.
  4. Providing Accurate Information
    Misrepresentation of facts during the company’s formation can lead to legal consequences.

Rights of a Promoter

Despite their duties, promoters are entitled to certain rights:

  1. Right to Indemnity
    They can claim indemnity for liabilities incurred during company formation.
  2. Right to Recover Preliminary Expenses
    Expenses made for incorporation can be reimbursed.
  3. Right to Remuneration
    Promoters can receive remuneration for their services, either as cash or shares.

Liability of a Promoter

Promoters may face liabilities in specific scenarios:

  • Civil Liability: Misrepresentation or breach of duties can result in compensation claims.
  • Criminal Liability: Fraud or deliberate misconduct can lead to prosecution.
  • Public Examination: Promoters may be publicly examined in cases of company insolvency.
  • Personal Liability: They can be personally held liable for contracts signed before incorporation if the company does not ratify them.

Difference Between Promoters and Directors

Parameters Promoters Directors
Role Initiates the idea and formation of the company. Manages and oversees the operations of the company post-incorporation.
Involvement Active during the pre-incorporation phase. Active throughout the life of the company.
Legal Appointment Not formally appointed; their role is based on their contribution to forming the company. Formally appointed by shareholders or the board of directors.
Legal Status Not considered an officer of the company. Considered an officer under company law with defined duties.
Remuneration Paid for services during company formation, often through shares or cash. Paid via salaries, commissions, or benefits as determined by the company.
Ownership of Shares May or may not hold shares in the company. Often hold shares as part of their involvement in the company, but not mandatory.
Examples Founders, early-stage investors, or consultants initiating the company. Board members or executives appointed to run the company.

Related Read - Who is a Director of a Private Limited Company?

Real-Life Examples of Famous Company Promoters

1. Dhirubhai Ambani (Reliance Industries)

Dhirubhai Ambani, the visionary founder of Reliance Industries, started the company in 1966 as a small polyester trading firm. Through his entrepreneurial spirit, he transformed it into a global conglomerate spanning petrochemicals, textiles, and telecommunications, making Reliance a household name in India.

2. Narayana Murthy (Infosys)

Narayana Murthy, the co-founder of Infosys, played a pivotal role in establishing one of India’s most successful IT companies in 1981. His commitment to transparency, innovation, and customer-centricity positioned Infosys as a global leader in software services and outsourcing.

3. Elon Musk (Tesla, SpaceX)

Elon Musk is a modern-day promoter known for revolutionising industries through Tesla and SpaceX. By promoting electric vehicles and renewable energy with Tesla and pioneering space exploration with SpaceX, Musk has demonstrated how visionary leadership can disrupt traditional industries and redefine the future.

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One Person Company
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1,499 + Govt. Fee
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Private Limited Company
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Frequently Asked Questions

What are the promoters of a company?

Promoters are individuals, groups, or entities that take the initiative to establish a company. They are responsible for conceiving the business idea, arranging initial funding, completing legal formalities, and ensuring the company is incorporated. 

Can a promoter of a company be the independent director?

No, a promoter cannot serve as an independent director of the same company. According to Section 149(6) of the Companies Act of 2013, independent directors must not have any material or relationship with the company, its promoters, or its directors. 

How to become a promoter of a company?

To become a promoter of a company, you need to:

  1. Conceive a Business Idea: Identify a viable business concept or opportunity.
  2. Conduct Feasibility Studies: Evaluate the market potential, resources, and legal requirements.
  3. Prepare the Incorporation Process: Draft documents such as the Memorandum of Association (MOA) and Articles of Association (AOA).
  4. Arrange Capital: Secure the initial funds needed to start the business, either through personal investment, partnerships, or external sources.
  5. Register the Company: File for incorporation with the Registrar of Companies (ROC) as per the applicable laws in your jurisdiction.

How to find promoters of a company?

To identify the promoters of a company, you can:

  1. Check Company Filings: Promoters are often named in the incorporation documents, such as the MOA, AOA, or prospectus.
  2. Review Annual Reports: Public companies disclose promoter details in their annual reports under the shareholding pattern section.
  3. Visit MCA (Ministry of Corporate Affairs): In India, you can access promoter details on the MCA website by searching the company’s filings.
  4. Examine Stock Exchange Filings: For listed companies, stock exchanges (like NSE and BSE) provide shareholding data that identifies promoters.

What is the legal position of a promoter?

The legal position of a promoter is that of a fiduciary agent for the company. While they are not employees or directors, promoters owe a duty of good faith and fairness to the company. Their legal responsibilities include:

  • Acting in Good Faith: Avoiding conflicts of interest and prioritising the company’s interests.
  • Disclosing Personal Interests: Declaring any personal benefits or profits made during the promotion process.
  • Liability for Misrepresentation: Promoters can be held liable for false statements in the prospectus or incorporation documents.
  • Compliance with the Law: Ensuring all legal formalities are followed during company formation.

What is the difference between the promoter and the founder of the company?

Parameters Promoter Founder
Definition Individual or entity responsible for establishing the company. Person who starts the business idea.
Role Focuses on legal incorporation and securing capital. Often plays a visionary role in the business journey.
Involvement May step away after incorporation. Usually continues to manage and grow the company.
Legal Status Named in company incorporation documents as per law. Not necessarily defined legally.
Example Early-stage investors or professionals. Entrepreneurs or business visionaries.

In many cases, a founder can also act as a promoter, but not all promoters are founders.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

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Procedure for Converting a Private Limited Company to an OPC

Procedure for Converting a Private Limited Company to an OPC

As startups evolve and founders reassess business needs, many look for simpler structures that offer flexibility without compromising legal benefits. One such move gaining traction is the conversion of a Private Limited Company (Pvt Ltd) into a One Person Company (OPC) — especially when a company reduces to a single shareholder or no longer requires multiple directors.

In this blog, we break down the process, eligibility, benefits, and post-conversion obligations involved in converting a Private Limited Company to an OPC in India.

Table of Contents

Private Limited Company

A Private Limited Company is a widely preferred structure for startups and growing businesses in India. It requires:

  • A minimum of 2 directors and 2 shareholders
  • Limited liability protection
  • Separate legal identity
  • Mandatory compliance with the Companies Act, 2013

This structure is ideal for businesses seeking external funding and operational scale. However, it can become administratively heavy for a solo founder or small team.

Related Read: Characteristics of Private Limited Company

One Person Company (OPC)

An OPC is a simplified structure designed for solo entrepreneurs who want the benefits of a corporate entity without the complexities of a Private Limited Company. Key features include:

  • Only one shareholder and one nominee required
  • Limited liability protection
  • Separate legal identity
  • Lesser compliance burden

An OPC is ideal for solo founders, consultants, and professionals transitioning from informal to formal business setups.

Related Read: Advantages of One Person Company

Eligibility Criteria for Converting a Company into an OPC

As per Rule 7 of the Companies (Incorporation) Rules, 2014, a Private Limited Company can be converted into an OPC if:

  • The company has no more than one shareholder (at the time of conversion)
  • The shareholder is an Indian citizen and resident in India (staying in India for at least 120 days during the financial year)
  • The company has no outstanding liabilities or ongoing litigation
  • The company’s paid-up capital is less than ₹50 lakh, and its annual turnover is under ₹2 crore (as per past financials)

Note: These limits may be relaxed depending on MCA updates, so always check the latest provisions.

Benefits of Converting a Company to an OPC

  • Lower compliance requirements – Less paperwork, fewer meetings
  • Sole ownership with control – Ideal for solo founders
  • Limited liability – Personal assets remain protected
  • Separate legal entity – Recognised as a company under law
  • Brand credibility – Enjoys more trust than sole proprietorships

Process for Converting a Private Limited Company to an OPC

Here's a step-by-step breakdown:

1. Board Meeting

  • Pass a resolution to convert the Pvt Ltd company into an OPC
  • Approve a draft of the special resolution for shareholder approval

2. Shareholder Approval

  • Convene an Extraordinary General Meeting (EGM)
  • Pass a special resolution authorising conversion into an OPC

3. Filing with ROC (Registrar of Companies)

  • File Form MGT-14 within 30 days of passing the special resolution
  • File Form INC-6 with the following attachments:
    • Board & shareholder resolutions
    • Updated MOA & AOA (altered for OPC structure)
    • Declaration by directors and shareholders
    • Latest audited financial statements
    • Affidavit stating the company is free of debts and litigation

4. Scrutiny by ROC

  • The Registrar reviews all filings and may request clarifications

Issue of Certificate

Upon successful verification, the ROC issues a Certificate of Incorporation reflecting the conversion from Private Limited to OPC. This certificate carries the same company registration number (CIN), but the company name is updated to include “(OPC) Private Limited.”

Post-Conversion Requirements by the OPC

After conversion, the newly formed OPC must:

  • Update PAN, TAN, GST registrations, bank accounts, contracts, etc.
  • Use the new name with “(OPC) Private Limited” on all communications
  • Maintain books of accounts and comply with annual filing requirements (though fewer compared to a Pvt Ltd)
  • Inform all stakeholders, vendors, and customers about the structural change

Final Thoughts

If you're a solo founder managing a Private Limited Company and want to streamline operations while retaining limited liability, converting to an OPC could be a strategic move. With reduced compliance and full control, you get the best of both worlds- formal recognition with solo flexibility.

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Private Limited Company
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Limited Liability Partnership
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  • Firms seeking any capital contribution from Partners
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Private Limited Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What are the turnover and capital limits for conversion?

To convert a Private Limited Company into an OPC, the following financial thresholds must be met:

  • Paid-up capital must be less than ₹50 lakhs
  • Annual turnover must be less than ₹2 crores (as per the latest profit and loss statement)

These limits are prescribed under Rule 7 of the Companies (Incorporation) Rules, 2014. If your company exceeds these limits, conversion may not be permitted.

How long does it take to convert a private limited company into an OPC?

The conversion process typically takes 3 to 4 weeks, depending on:

  • Accuracy of documentation
  • Timely approval from shareholders
  • Workload at the concerned Registrar of Companies (ROC)
  • Any queries or objections raised by the authorities

Filing forms like MGT-14 and INC-6 correctly the first time helps avoid delays.

Is shareholder approval required for conversion?

Yes, shareholder approval is mandatory. A special resolution must be passed in a duly held Extraordinary General Meeting (EGM). The resolution, along with supporting documents, is then filed with the ROC via Form MGT-14.

Can a foreign national form or be part of an OPC?

No, a foreign national cannot incorporate or be a member/nominee of an OPC in India. Only a natural person who is a citizen of India and a Resident in India (i.e., stayed in India for at least 120 days during the previous financial year) is eligible to form an OPC or be appointed as its nominee.

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Smooth onboarding, seamless incorporation and a wonderful community. Thanks to the #razorpayrize team! #rizeincorporation
Dhaval Trivedi
Basanth Verma
shopeg.in
Exciting news! Incorporation of our company, FoxSell, with Razorpay Rize was extremely smooth and straightforward. We highly recommend them. Thank you Razorpay Rize for making it easy to set up our business in India.
@foxsellapp
#razorpayrize #rizeincorporation
Dhaval Trivedi
Prakhar Shrivastava
foxsell.app
We would recommend Razorpay Rize incorporation services to any founder without a second doubt. The process was beyond efficient and show's razorpay founder's commitment and vision to truly help entrepreneur's and early stage startups to get them incorporated with ease. If you wanna get incorporated, pick them. Thanks for the help Razorpay.

#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
TBS Magazine
Hey, Guys!
We just got incorporated yesterday.
Thanks to Rize team for all the Support.
It was a wonderful experience.
CHEERS 🥂
#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
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