6 Different types of Companies- Explained with Examples

Different Types of Companies

As per Companies Act, 2013, there are Different types of Companies either based on its creation or its existence. These are mainly divided into 6 types shown as following: –

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What are the different types of Companies:

The companies can be classified as:

  1. One Person Company
  2. Private Company
  3. Public Company
  4. Company Limited By shares
  5. Unlimited liability Company
  6. Company Limited by Guarantee

1.One Person Company:

It refers to the form of a company in which the only single person is the owner/ member of the company.

Section 2(62) of the Companies Act, 2013 defines One Person Company as,

“One person Company means a company which has only one person as a member.”

Characteristics of One person Company as per Rule 3 of Companies (Incorporation) Rules, 2014

  1. The person must be a natural person being an Indian Citizen and resident in India can incorporate One person Company.
  2.  One person can create only one such company or become a nominee of one such company.
  3. The purpose for which it is formed, should not be charitable.
  4. It must not include Non-Banking Financial Investment activities including investments in Securities of any body corporate.
  5. The paid-up share capital must not be more than Rs. 50 Lakhs.
  6. The average annual turnover of three years should not exceed Rs.2 crores.
  7. It must have at least one director but not more than 15 directors.

Some of the examples of One Person Company  :

  1. Durga Cotton Private Limited(OPC), Mumbai
  2. Rash Farm (OPC) Private Limited, Chhatisgarh
  3. Nature’s Nectar Wellness (OPC) Private Limited, Chennai.

2.Private Company :

A private company is the one that has the minimum paid-up share capital as prescribed in the Articles of Association.

Characteristics of a Private Company: 

  1. Article of Association doesn’t allow the transfer of shares.
  2. It requires at least two members to incorporate a company.
  3. It limits the number of its members to 200, excluding its present or past employees.
  4. The shares held by two or more persons would be treated as single-member.
  5. As per Section 2(68) of the Companies Act, It cannot invite the public to subscribe to the share capital in the company.
  6. There should be at least 2 directors but not more than 15 directors.
  7. Shares may be allotted as per the decisions of Directors.
  8. It cannot invite and accept public deposits.
  9. The name of the company must end with ‘Private Limited’.

Some of the examples of Private Companies are:

  1. American Express (India) Private Limited
  2. Lifestyle International Private Limited
  3. Microsoft Corporation Private Limited
  4. PayPal Payments Private Limited 

3. Public Company:

A public company is the one which:

  1. is not a private company
  2. has a minimum paid-up share capital as prescribed 
  3. is a private company, having a public company as a holding company.
  4. It must have at least 7 members to incorporate a company.
  5. There is no restriction on the transfer of shares 
  6. A prospectus is issued to invite the public to share capital subscription.
  7. It must have at least 3 directors but not more than 15.
  8. The shares can only be allotted if the minimum subscription has been received.
  9. It can invite and accept deposits from the public.
  10. The word ‘Limited’ is used as a part of its name.

Some of the examples of Public Companies are:

  1. Indian Oil Corporation Limited
  2. Bharat Petroleum Corporation Limited
  3. Oil and Natural Gas Corporation Limited
  4. State Bank Of India 

4. Company Limited By shares :

As per Section2(22) of the Companies Act, Company Limited by shares is the one in which-

  1. the liability of members is limited to the amount unpaid on shares held by them.
  2. These companies use Limited words in their name to specify the limited liability of members.

5. Unlimited Liability Companies:

As per Section 2(92) of the Companies Act, 2013, “It is a company where the liability of its members is unlimited.”

In this type of Company, the shareholders are liable to donate the amount if the company fails to pay the debts. Also, at the time of liquidation, the shareholders have to pay on their own if the company has insufficient funds to pay the liabilities.

6. Companies Limited By Guarantee :

As per Section 2(21) of the Companies Act, 2013, Company limited by guarantee is one in which the liability of its members is limited to the amount, the members may respectively undertake to contribute to the assets of the company at the time of winding up.

In other words, in this type of company, the members agree to pay a specific amount towards the commencement of business, in case the company is liquated. This amount is referred to as “Guarantee”. There is no liability of shareholders except this guarantee. Thus, It is known as Company Limited by Guarantee.

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