TYPES OF COMPANIES

Saptaparni Raha
Jul 31, 2022
3 min read

July 27, 2022

Introduction:

Whenever we hear about a company's form of business, the only question that comes to our mind is the type of company it is. We need to know about the type of company we want to form before incorporating our own company.

Classification Of Companies:

Companies based on Liabilities.
Companies based on Members.
Companies depending upon Control or Holding.
Companies in terms of Access to Capital.
Other Types of Companies.

Definitions Of Companies Under The aforementioned Classifications:

1) Companies Based on Liabilities:

Company limited by share

Where the company and shareholders do not pay the entire value of their share in one go, but during the winding up of the company, the members of the company are liable to pay until they pay the remaining amount of their shares.

Limited Company

The Memorandum of Association (MoA) of some companies specifies the number of money members guarantee to pay. In case of winding up, members will only pay the amount they guaranteed.

Unlimited Company

When companies do not have any limit on their members' liability, but in winding up, the company can use all personal assets of shareholders to meet its debts.

2) Classifications of Companies Based on Members:

One-Person Company

The one-person company has only one member as a sole shareholder, and it does not need to have any minimum share capital.

A Private Company

A private company needs to have a minimum of 2 and a maximum of 200 members.

A Public Company

In a public company, members can freely transfer their shares. This company needs to have a minimum of 7 members, but the maximum number of members in a public company is not limited.

3) Company Based on Holding:

Parent and Sister Companies

When shares of any company are held wholly or partly by another company or company-owned, these are known as holding or parent companies. When any parent company holds shares of any other, that company becomes the subsidiary company.

Associate Company

When a company possesses a significant influence on other companies, it is known as an associate company. This means the ownership of 20% shares in an associate company.

4) Companies That Have Access To Capital:

Listed Company

A company that has its securities listed on the stock exchange, where people can freely buy its securities is known as a Listed Company.

E.g., Public Company.

Unlisted Company

A company that does not list its shares on a stock exchange is known as an Unlisted Company.

E.g., Public and Private Companies both come under this category.

5) Other Companies:

Government Company

When Central Government, or the State Governments hold the shares of more than 50 % of any company, then such companies are known as Government Companies. Sometimes the central and state government may jointly hold the shares of any company, which is too called a government company.

Foreign Company

Companies that are incorporated outside India but which conduct their business in India using a place of business by themselves or with other companies are known as Foreign Companies.

Charitable Company

Certain companies have charitable purposes as their objective. These companies are registered under Section 8 of the Companies Act, 2013. Charitable Companies are mainly focused on the promotion of arts, science, culture, religion, education, sports, trade, commerce, etc.

Nidhi Company

Members of a Nidhi company provides deposit, and the company uses these deposits for its benefit.

Dormant Company

A dormant company is formed for future projects. This company does not carry out the compliances of a regular company.

Conclusion:

These are the different types of companies, and to incorporate your own company, you must be fully aware of the types and incorporation procedures of these companies.