Overview of Private Limited Company

Private Limited Companies are the preferred choice for 95% of Indian businesses. As artificial persons created by law, they can act independently, sue, and be sued in their own name. This structure ensures a clear distinction between directors (managers) and shareholders (owners). Many foreign companies establish their Indian subsidiaries as private limited entities due to their credibility and legal recognition. Private limited companies are known for their streamlined compliance processes and are attractive for equity funding.

A sole proprietorship is the simplest and quickest entity to establish, and it is ideal for entrepreneurs exploring new business ideas. Also known as a proprietorship in India, it operates without formal registration or government incorporation, making it a straightforward choice for business startups.

Sole Proprietorship

Overview of Sole Proprietorship

A sole proprietorship, also known as a proprietorship in India, is a business structure that does not require formal registration or incorporation with government bodies to start operations. However, depending on the nature and scale of the business, specific registrations and licenses may be necessary. For example, a sole proprietorship operating a restaurant would need mandatory licenses such as the FSSAI food license and Shops and Establishment license.

Key Deliverable

Certificate of any applied licenses or registrations (If available)

Public Limited Company

A Public Limited Company is ideal for large, scalable businesses requiring substantial capital. It provides limited liability to shareholders and allows shares to be offered to the general public, facilitating trading on the stock market.

Overview of Public Limited Company

A Public Limited Company, as defined by the Companies Act 2013, is a joint stock company that is not classified as a Private Company. It is formed by association of persons voluntarily and requires a minimum of ₹5 lakhs of paid-up capital

Key Features:

• Shareholders: No limit on the number of shareholders; formed by voluntary association.

• Capital Requirement: Must have a minimum paid-up capital of ₹5 lakhs.

• Public Subscription: Can invite the general public to subscribe to shares and debentures.

• Name Requirement: Must include "Public Limited" or "Limited" as a suffix in its name.

Types of Public Limited Companies

1. Unlisted Public Limited Company:

   • Not listed on stock exchanges.

   • It can have an infinite number of shareholders.

   • Shares are considered unlisted.

2. Listed Public Limited Company:

   • Listed on specific stock exchanges.

   • Shares are publicly traded.

   • Criteria for listing include:

   • Net tangible assets of at least ₹3 crores in each of the preceding three full years.

   • Average minimum profit before tax of ₹15 crores in at least three out of the past five years.

   • Net worth of at least ₹1 crore in each of the previous three years.

   • Minimum revenue criteria after any change in company name.

   • Shares issue size not exceeding five times the current net worth.

Limited Liability Partnership

Limited Liability Partnership (LLP) is gaining popularity among self-funded groups of partners due to its unique blend of limited liability and reduced compliance burden. It combines the flexibility of a partnership firm with the advantages of a private limited company, making it an attractive choice for business entities

Overview of Limited Liability Partnership

Limited Liability Partnership (LLP) is a distinct legal entity, similar to a Private Limited Company, capable of legal actions in its own name. Each partner's liability in an LLP is limited to their contribution to the partnership.

LLPs offer cost-effective formation and compliance due to fewer regulations. There is no minimum capital requirement for an LLP.

An LLP can be formed with a minimum of 2 partners, and there is no maximum limit on the number of partners. At least 2 partners must be designated partners, with at least one being a resident Indian. Designated partners are responsible for LLP compliance under the LLP Act 2008.

Partnership Firm

A partnership is a business relationship formed when two or more individuals agree to share profits and responsibilities. Unlike a legal entity, a partnership itself cannot sue or be sued by others. It's a collaborative arrangement based on mutual goals and shared outcomes.

Overview of Partnership Firm

Partners are individuals who join together to operate a business under a partnership arrangement. In a partnership firm, each partner's liability is unlimited, meaning they are personally responsible for the firm's losses, regardless of their initial investment.

Partnerships in India are governed by the Indian Partnership Act, of 1932, which outlines three essential elements of a partnership:

1. Agreement: A partnership is formed through an agreement between two or more individuals.

2. Profit Sharing: The partners agree to share the profits generated by the business.

3. Management: The partners collectively or individually manage and represent the business

Section 8 Company

When a company is registered as a Non-Profit Organization (NPO) under Section 8 of the Companies Act, its primary objective is to promote various fields such as arts, commerce, education, charity, environmental protection, research, sports, science, social welfare, and religion. Section 8 companies utilize their profits or income solely for advancing these noble causes and objectives.

Overview of Section 8 Company

Section 8 companies, registered under the Companies Act 2013, are nonprofit organizations dedicated to promoting various charitable objectives. They cannot distribute dividends to shareholders and must use their income exclusively for advancing these purposes. Section 8 companies are subject to strict government regulations and must adhere to specified rules; failure to comply may result in government-ordered closure and legal actions against company members. During incorporation, a Section 8 company must provide a three-year financial plan detailing income sources and expenditure purposes. Despite their nonprofit status, Section 8 companies operate similarly to public limited companies, sharing comparable rights and duties.

One Person Company

A One Person Company (OPC) is a distinct legal entity under the Companies Act 2013, uniquely designed for businesses with a single member who acts as the sole shareholder. OPCs are ideal for entrepreneurs or successors who prefer to operate independently without involving additional partners in the company.

Overview of One Person Company

A One Person Company (OPC) is an ideal choice for entrepreneurs seeking the benefits of a company while operating as a sole proprietor. As a legal entity, an OPC can act independently, sue or be sued in its own name. The sole member of an OPC appoints a nominee who can take over in case of the member's demise, either continuing the business or closing the company. Additionally, an OPC can be converted into a Private Limited Company voluntarily after 2 years or automatically if its revenue exceeds 2 Crores, subject to necessary filings.

Frequently asked questions

What is a DSC and DIN?

DSC (Digital Signature Certificate) is a secure digital tool issued by certifying authorities for signing electronic documents, mandatory for filing incorporation and other documents with government agencies.

DIN (Director Identification Number) is a unique 8-digit identifier assigned to directors of a company, providing lifetime validity and is mandatory for all directors.

What is the capital required to start a one-person company?

After the Amendment Act in 2015, there is no minimum capital required for incorporating a one-person company (OPC). The authorized capital can be as low as Rs. 1, but for practical purposes, it is recommended to have at least Rs. 99,999 to minimize government fees.

Who Controls a public limited company?

Shareholders are the true owners of a Public Limited Company, empowering a board of directors to oversee and steer business decisions effectively.

Can a listed company be converted to LLP?

No, only private or unlisted public companies or partnership firms can be converted into LLPs.

Can a Limited Liability Partnership (LLP) be dissolved?

Certainly! An LLP in India can be closed by either declaring it as defunct, if it has not operated for one year, or by following a formal winding-up process to settle all affairs, assets, and liabilities.

How is section 8 company different from trust and society?

Section 8 companies are governed by the Companies Act, of 2013, while trusts are regulated by The Indian Trusts Act, 1882. Societies, on the other hand, are governed by The Societies Registration Act, of 1860, with certain states having their trust acts.

Who can Incorporate a Section 8 Company?

Any individual or group of individuals can apply for Section 8 company registration, except for minors (below 18 years old).

What is an 80G certificate?

The 80G Certificate exempts individuals from paying taxes on donations made to charitable organizations like Section 8 companies, subject to specified maximum allowable deduction criteria.

How to obtain an 80G Certificate?

Registration under this section will be processed by the Income Tax Commissioner upon receiving Form 10G from the applicant.

What is the taxation for a sole proprietor in India?

A Sole Proprietorship is taxed based on individual slab rates:

• Income up to Rs 2,50,000: No tax

• Income from Rs 2,50,000 to Rs 5,00,000: 5%

• Income from Rs 5,00,000 to Rs 10,00,000: 20%

• Income above Rs 10,00,000: 30% Additionally:

• Surcharge: 10% on income tax for total income exceeding Rs.50 lakh up to Rs.1 crore

• Surcharge: 15% on income tax for total income exceeding Rs.1 crore

• Cess: 3% on total of income tax + surcharge.

What is the duration within which the Limited Liability Partnership needs to be formed, post getting the name approved?

The approved name of an LLP remains valid for 3 months (90 days) from the date of approval.

Can an OPC be formed by an NRI?
Yes, an OPC can be formed by an NRI provided that the subscriber of the company has stayed in India for more than 120 days in the previous calendar year.

Can a one-person company get an import/export code?

Yes, a One Person Company (OPC) can obtain an import-export license.

To obtain an Import Export Code (IEC), follow these steps:

1. Obtain the Shop Act License for the firm.

2. Have a PAN card for the individual or the firm.

3. Provide an address proof such as a light bill or rent agreement in the name of the firm.

4. Open a bank account in a nationalized bank and obtain a chequebook.