What is a company?
what is all this Pvt ltd, public ltd, OPC How chose the right registration for you? Hi guys, welcome to COmpair Online. Today we will discuss, which type of company to register When you register your business you register it in two ways.
First, you are taking permission to run the business as a sole proprietor or as a partnership But, when you form a company, In that case, the company is a separate entity As per law, you and your company are two separate entities. The liabilities of the company are not your liability.
How to decide you should register a company or not
How to decide if you should register a company or not, and which type of company should one register? First, decide the number of members.
Are you starting your business alone or you are with 10 other people? If you are alone, then you can register as a sole proprietorship. It won’t be a separate company you and your business are the same. You have the legal rights to run a business but it is not a separate legal entity.
If 10 people are starting the company, then you can register it as a partnership firm, private limited, or public limited. The second step is based on your liability. A separate company has its own liability. Based on liability, there are 3 types of companies.
First, limited by shares. If you have a limited number of shares, then your liability is also limited to those shares and not the whole company. Your partners’ liability is also dependent upon the shares they had in the company.
The second is limited by guarantee. How much debt of the company, you had guaranteed If you had guaranteed 10 lakh, then that would be your liability.
Third is unlimited. You have the burden of the company, The bank has the right to seize your personal assets as a repayment for their loan. you need to know how much loan do you need. Do need protection against liability? Do you need capital for expanding? your company, In that case, I’ll highly recommend getting it registered as an ltd company.
Another factor is the company’s size, which depends upon total share capital. Most of the companies are small in starting.
Next is listed or unlisted. Only public limited companies are listed in the stock exchange list. We will talk about branches and subsidiaries in the growth and expansion article. We will discuss all these company types in detail.
The most simple and easy to register method is a sole proprietorship. You are running your business, your taxes and business taxes are the same No complicated formalities, and is very easy to register.
If you and your friends want to start a business but, you do not want to form a proper company and do not want all these formalities Then, just like a sole proprietorship, you can register as a partnership firm.
There is only one extra partnership deed document In a sole proprietorship, it is your own call and no deed is required. But, here, you need a partnership deed The share ratio, role, and responsibilities of partners. all this is mentioned in the partnership deed.
The big companies which sell their shares and trade them are the public limited companies. Their shares can be traded publicly, that is why these companies have many regulations.
They have to follow much compliance to protect the interest of the general public who are investing in that company. The shares are easily transferable. It requires a minimum of 5 lacs of working capital and at least 7 members You need.
not get tensed about the public limited company. You can transfer from public unlimited to public limited as per section-32 of the companies act. It has certain rules, which you can check later But now, you need to know what is a public limited company.
If you want to register right now, you can. this is a private limited company. There can be 2-50 members and a minimum of 1 lakh of working capital is required. You can not transfer shares from public trading But, there are ways to transfer the shares.
Advantage and disadvantages of a company
First, the company is a separate entity and you are a separate entity. If the company is under a debt of 5 crores And all of the company’s assets make a total sum of 1.5 crores Even then, your personal assets are safe If they are under your name and not the company.
Second, it is easier to get loans when you register yourself as a company. One way to raise capital is debt, that is loan If you do not want it, you have an option to raise money through equity by attracting big firms and investors to invest in your business, and you can grow your business.
even better For that, you need to register yourself as a company. This raises the credibility and the investors prefer investing in a proper company Initially, you would be a small or micro company. If you register yourself as MSME you get many special rights of which, we will talk about in a separate article.
The smaller companies have taxes lower than that of the partnership firms. So, you can save more on taxes also It was the positive side.
What is the problem in the company? Why don’t people register as a company? Because the registration process is too long It’s a bit complicated. That is why people avoid registering as a company.
Besides this, there is much compliance. Public limited has most of the compliance but, private limited also has compliance. like your annual meeting, audit requirements, and all meeting these regulations is expensive. that is why people avoid registering as a company.
You should think if you need to register yourself as a company, as per your needs or you are fine with a sole proprietorship. private limited companies need at least 2 members and you are alone. but still want to be a registered company.
OPC – One Person Company
Public limited companies have ltd in the end, private limited companies have Pvt ltd in the end. Similarly, the OPC is at the end of OPC. Suppose you have a business Sunaina photography. Your registered company will be Sunaina Photography OPC.
You would only need a nominee Its registration process is a little simplified as compared to private limited and have fewer compliance But still, you are a proper company.
Also, the government, nowadays, is encouraging people to do business, That is why OPC is formed. If you are an entrepreneur and don’t have a team you can function as a company and take advantage of other companies.
limited liability Company
Another option is a limited liability company. The business within the family and you have to be connected by blood Besides Hindus, Sikhs, Buddhists or Jain can also register People made Joint Hindu Family so that they don’t have to pay additional taxes on the inherited ancestral property. The company’s taxes and your taxes would be different, But it is very difficult to dissolve such companies There is no proper procedure for it.
The only way is a partition, for which every member should agree It is not so prevalent, but still, you should know what it is.
Now you can decide how to register your business. But if you are still confused, then we can make a separate Article where I can take your questions to decide how should you register and next , we will discuss step by step registration process for all these types.