Now-a-days, entrepreneurs opt for company form of organisation and looks at the scope of entering into Corporate World. Various types of companies can be formed according to the requirement of business and its activities. In this blog, we will discuss the basic types of a company in India.
A company, as per Indian Companies Act, 2013 is a company Incorporated under Companies Act, 2013 or under any previous company law. The Act further prescribes following types of the Companies in India on the basis of Liability.
- Company Limited by shares
- Company Limited by Guarantee
- Unlimited Company
- Company Limited by Shares:
In this form of Company, the capital is introduced in the form of Shares i.e. the capital of the company is divided into small portion, which are known as shares. The shares are considered interest of the shareholder in the company. The number of equity shares held, measures the ownership of the shareholder in the company.
Whenever the requirement of capital arises in the company, the shares are issued by the company and subscribed by the shareholders. In this type of company, the liability of the members is limited up to the unpaid capital on the shares subscribed.
- Company Limited by Guarantee:
The company can be either private limited company or a public limited company also, where the capital is not divided into shares. Here, the capital to be introduced by the members, are in nature of guarantee.
The subscriber to the Memorandum subscribes the amount guaranteed and puts signature against the amount guaranteed.
Here, the percentage of the ownership is based on the amount guaranteed. Whenever the requirement of capital arises, the members introduce the capital to the company. The liability of members is limited up to the amount of guarantee provided only.
These companies can also issue shares, where the shareholders are also liable up to the amount unpaid on the shares as discussed above. However, the shareholding is not criteria of deciding the ownership.
- Unlimited Company:
In this type of company, the liability of the members is not limited. In case of any debt arises, the liability of the members does not limit to their part in company, rather it extends to their personal assets also. In present scenario, this type of company is not being chosen to be incorporated by the entrepreneurs.
The liability of the members arises at the time of winding up or bankruptcy or otherwise, whenever the capital is to be raised or debt is to be paid. Most popular type of company is Company limited by shares. The companies can be further bifurcated in different types such as private or public company i.e. based on the nature of the company. Based on activities, it can be branched into Charitable Company, Nidhi Company, etc.