Companies can be classified into different types based on their mode of incorporation, the liability of the members, and number of the members. The most common types of companies are:
- Statutory Companies.
- Government Companies.
- Registered or Incorporated Companies.
- Companies Limited By Shares.
- Companies Limited By Guarantee.
- Unlimited Companies.
- Public Company (or Public Limited Company)
- Private Company (or Private Limited Company)
- One Person Company
Types Of Companies Based On The Number Of Members
Public Limited Company
The legal existence of a Public Limited Company is separate from its members (shareholders) and the liability of its members is also limited. Its existence is thus not affected by the retirement or death of its shareholders. A minimum of 7 members is needed to form a Public Limited company but there is no maximum limit on this. The company collects its capital by the sale of its shares to the shareholders. The shareholders of a company do not have the right to participate in the day-to-day management of the company, thus separating ownership from management. All the major decisions of the company are taken by the Board of Directors.
Private Limited Company
Private” means it restricts the public to buy the company shares whereas in case of a public limited company it allows the public to buy the company shares. The word “Limited” denotes Company’s shareholders which can be minimum 2 and maximum 200 are liable for its debt.
The shareholders can be a person or a company including foreign companies. The shareholders cannot offer their shares to the general public over stock exchange. The minimum capital required for the private limited company according to Section 2, Clause 68, Companies Act 2013 is 1 Lakh.
The main advantage of setting up a private limited company is that if a company goes into the loss, the shareholders are liable to sell the shares to recover the loss. The shareholder’s personal assets are not at the risk which is the main reason why most of the businesses choose a private limited company.
One Person Company
One Person Company (OPC) as a company type was introduced in the Companies Act of 2013 in India. It is similar to a sole proprietorship but the owner shall have limited liability and thus his personal assets would not be at risk if losses need to be recovered or if the company is liquidated.