In India, the entity registration possibilities are:
- Private Limited Company and Public Limited Company: A private limited company is a privately held entity with the maximum number of members restricted to 200 in terms of the governing Companies Act, 2013. A private limited company is hence not allowed to come out with an Initial Public Offering and trade on the exchange(s). Additionally, there are restrictions on transfer of shares in a private limited company which are: a. rights of pre-emption and b. Director’s refusal to registration of transfer of shares. A public limited company on the other hand does not cap the number of members and is not required to have any restriction on transfer of shares. The shares of a public limited company can be publicly traded on the stock exchange(s). Whilst the requirement of a minimum paid up share capital has been dispensed with, the same will need to be looked into by promoters carefully basis the company’s requirements.
- One Person Company: A one person company or an OPC is a new concept and means a company has only one member. An OPC has a threshold of paid up capital at INR 50 Lakhs and cannot draw a turnover of more than 2 crores. Notably, the memorandum of an OPC needs to indicate the name of the other person, with his/her prior written consent, who shall, in the event of the member ‘s death or his incapacity to contract become the member of the company . This written consent also needs to be filed with the Registrar at the time of incorporation of the OPC along with other charter documents.
- Partnership firm and Limited liability partnerships: A partnership firm is formed by persons who have entered into partnership and are individually called as “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm-name” (as per Section 4 of the Partnership Act, 1932). This type of entity needs to be registered under the Partnership Act, 1932 and entails unlimited and joint liability for the partners. On the other hand, a Limited Liability Partnership seeks to limit the liability of partners whilst providing the benefits of a partnership such as taxation and ease of filings under the applicable laws. Unlike a general partnership, an LLP also enjoys the benefit of being in perpetual existence. LLPs are governed by and required to be registered under the provisions of the Limited Liability Partnership Act, 2008.
- Sole-proprietorship: When a single person carries on a business, he/she can carry out the business as a sole-proprietorship. Whilst this model does not require any registration per se, the sole-proprietor will need a Goods and Services Tax (GST) registration if the annual turnover of the sole-proprietorship exceeds INR 40 Lakhs (Rupees 40,00,000/-). GST registration is also required when the sole-proprietorship is conducting online business for instance, selling items on Amazon.
Corrida Legal is consistently rated as the best corporate law firm & lawyers in Gurgaon, Delhi and Mumbai. Reach out to us on LinkedIn or contact us at contact@corridalegal.com/+91-9211410147 in case you require any legal assistance. The author of this article is Pushkar Thakur, Managing Partner, Corrida Legal. Pushkar is an ex AVP, Legal, Nomura and has led the legal teams at corporates namely Emaar India and Drake & Scull India. He represent clients before all major courts of India and has worked with Kochhar & Co., law firm. Pushkar is an expert in corporate law, contracts, litigation, employment law and data protection. Reach out to him on LinkedIn at: https://www.linkedin.com/in/pushkarthakurcorridalegal/ or pushkar.thakur@corridalegal.com.
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