Different types of companies and their structures explained

Companies are classified into different types based on the structure of the company such as sole proprietorships, partnerships, and corporations.

The ownership of a company may belong to the government, private individuals, or foreign entities. The Companies Act 2013 provides several classifications of companies to suit different business needs. The primary types of the companies can be classified   on the following factors of incorporation:

Chartered Companies: These companies are formed by royal charters. Such companies no longer exist in India.

Statutory Companies: A statutory company in India is a corporate body established by a special act of Parliament or state legislature. The government fully funds these companies, and the legislature defines their powers, objectives, and limitations. Statutory companies are accountable to the legislature that established them. Examples: Reserve Bank of India (RBI), Food Corporation of India, etc.

Registered Companies: A registered company is a business that has been officially registered and incorporated under the Companies Act of 2013 or equivalent legislation. The Registrar of Companies (ROC), a government agency, issues a certificate of incorporation to a company that has been registered.

Listed Companies: A listed company in India is a public company whose shares are traded on a recognized stock exchange, such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). Listed companies are subject to regulation by the Securities and Exchange Commission (SEBI) and must meet certain requirements to remain listed

Based on Liability:

Companies Limited by Shares: Shareholders’ liability is limited to the unpaid value of their shares.

Companies Limited by Guarantee: Members guarantee a specific amount to be paid in case the company is wound up.

Unlimited Liability Companies: In unlimited liability businesses, the owners and partners are wholly responsible for their company’s debts and all other financial commitments. Unlimited liability refers to the indefinite extent of liability to pay a firm’s debts or obligations, extending beyond the investments of the firm’s owner(s).

Based on Number of Members:

Private Limited Company: A private limited company (Pvt Ltd) is a privately held business entity that limits its owners’ liability and restricts the transferability of its shares. In India, a private limited company must have at least two shareholders and a maximum of 200. It cannot invite the public to subscribe to shares, and they must include “Private Limited” in their name.

Public Limited Company: A Public Limited Company must have at least seven shareholders, but there is no limit on the maximum number of shareholders. Public Limited companies can issue different types of shares, including preference shares. Preference shareholders receive dividends at a fixed rate before other shareholders, but they usually don’t have voting rights.

Based on Control:

Holding Company: A company that holds majority control over another company’s Board or share capital.

Subsidiary Company: A company controlled by a holding company.

Based on Ownership:

Government Company: A company where the government holds 51% or more of the share capital.

Non-Government Company: A company owned and operated by private individuals or entities.

Foreign Company: A company registered outside India but operating within India.

One-Person Company (OPC): Introduced under the Companies Act 2013, an OPC allows a single individual to run a company with the benefits of limited liability and ease of management.

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