TYPES OF COMPANY REGISTRATIONS IN INDIA
I. Private Limited Company
II. One Person Company
III. Section 8 Company
IV. Limited Liability Partnership (LLP)
V. Microfinance Company under Section-8
VII. Nidhi Company
VI. Producer Company
I. INCORPORATION OF PRIVATE LIMITED COMPANY
A. What is a Private Limited Company?
A Private Limied Company is the most popular option to start a business in India for startups and businesses with higher growth aspirations. A Private Limited Company is incorporated under the Companies Act, 2013, and governed by the Ministry of Corporate Affairs in India. It is a registered corporate structure that provides a business with a separate legal identity from its owners.
- It can be registered with a minimum of two directors and subscribers/shareholders.
- A person can be both a director and shareholder in a Private Limited Company.
B. Advantages of Private Limited Company Registration in India:
- Easy Bank Finance: Compared to other business models such as sole proprietorship, Partnership, LLP, etc. Private Limited easily gets bank funding. Private Limited Companies can raise money easily from Banks, Financial Institutions, Angel Investors, venture capital firms, private equity firms, etc.
- Government Schemes: Various schemes launched by the government of India such as Start-up India, Make in India, etc to promote corporatisation (Company Form of Business).
- Trustworthiness: Companies in India are registered with the Registrar of Companies (ROC) under the Companies Act 2013. Anyone can check the details of the company through the Ministry of Corporate Affairs (MCA) portal.
C. Minimum requirements to register a private limited company:
- Unique name of company: The proposed name of the company should be unique and should not be similar or identical to an existing company or LLP or Registered Trademark. (Recommended to provide at least two names on a preference basis)
- Minimum two persons: A Private Limited Company can be registered by at least two persons, who shall act as the shareholders and Directors of the company, and out of which at least one director must be resident in India.
- Digital Signature of Directors and Shareholders: Digital Signature Certificate (DSC) is mandatory for all Directors and Shareholders
II. ONE-PERSON COMPANY “OPC”
A. What is a One-Person Company “OPC”?
As the name suggests, an “OPC” is a company established by a single person. A single individual establishes and manages the company. An OPC has all the features of a company, such as perpetual succession, limited liability, and a separate legal entity. Before this concept, a single person could not establish a company. If an individual wanted to establish his business, he/she could opt only for a sole proprietorship as there had to be a minimum of two directors and two members to establish a company.
- This type of Company can be formed with just 1 Director and 1 member. The director and member can be the same person.
B. Advantages of One-Person Company “OPC” Registration in India:
- Separate Legal Status: The OPC receives a separate legal entity status from the member. The separate legal entity of the OPC gives protection to the single individual who has incorporated it. The liability of the member is limited to his/her shares, and he/she is not personally liable for the loss of the company. Thus, the creditors can sue the OPC and not the member or director.
- Easy to obtain funds: Since OPC is a private company, it is easy to go for fundraising through venture capital, angel investors, incubators, etc. Banks and Financial Institutions prefer to grant loans to a company rather than a proprietorship firm. Thus, it becomes easy to obtain funds.
- Improved Credibility: OPC is registered with the Registrar of Companies (ROC) under the Companies Act 2013. Anyone can check the details of the company through the Ministry of Corporate Affairs (MCA) portal.
C. Minimum requirements to register a One Person Company (OPC):
- Unique name of the company: The proposed name of the company should be unique and should not be similar or identical to an existing company or LLP or Registered Trademark. (Recommended to provide at least two names on a preference basis.
- Appointment of Nominee: the nominee should be appointed before incorporation, consent of the nominee is mandatory in form INC-3.
- Digital Signature of Director: Digital Signature Certificate (DSC) is mandatory for a person.
III. SECTION 8 COMPANY/ NON PROFIT COMPANY
A. What is Section 8 Company
The primary goal of the Section 8 Company is to serve charitable purposes. In India, 3 legal forms exist for an NGO or Non-Profit Organizations i.e. Trusts, Societies and Section 8 Companies. Indian Trusts have no central law; Indian Societies have different legal and institutional frameworks from state to state while Section 8 companies have one uniform law across the country – Companies Act, 2013, thus making it more closely regulated and monitored than trusts and societies, and recognized all over the world.
- It has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any such other object.
- It can be registered with a minimum of two directors and shareholders.
- A person can be both a director and shareholder in a Section 8 Company.
B. Advantages of Section 8 Company Registration in India:
- Tax Benefits: Since Section 8 companies are more of a charitable institution, they have access to the various exemptions available under the IT Act. These companies are qualified to access multiple tax benefits and a tax cut. Section 80G of the Income Tax Act render tax-related benefits to these companies.
- Exemption to the Donators: Under Section 80G, the exemption is granted to the Donators if the Section 8 company is registered under Section 80G.
- Zero Stamp Duty: Section 8 companies are not liable to pay stamp duty on the MOA and AOA, unlike other entities falling under the Companies Act, 2013.
C. Minimum requirements to register a Section 8 company:
- Unique name of the company: The proposed name of the company should be unique and should not be similar or identical to an existing company or LLP or Registered Trademark.. (Recommended to provide at least two names on a preference basis) Section 8 companies don’t need to add the suffix “Limited” or “Private Limited” in their name.
- Minimum two partners: A Section 8 company can be registered by at least two partners, who shall act as the directors and shareholders of the company, and out of which at least one director must be resident in India.
- Digital Signature of Directors and Shareholders: Digital Signature Certificate (DSC) is mandatory for all Directors and Shareholders.
IV Limited Liability Partnership “LLP”
A. INTRODUCTION
A limited liability partnership is a body corporate and legal entity separate from its partners. It enjoys the status of a separate legal entity only after incorporation. LLP after registration can hold, acquire or dispose of all kinds of assets. It can sue others and be sued in its name.
- It can be registered with minimum of two Partners act as Designated Partners.
B. Advantages of Limited Liability Partnership “LLP” Registration in India:
- Tax-Free in Hands of Partners: For income tax purposes, LLP is treated on a par with partnership firms. Thus, LLP is liable for payment of income tax and the share of its partners in LLP is not liable to tax. Section 40(b): Interest to partners, any payment of salary, bonus, commission, or remuneration allowed as deduction.
- Compulsory Audit not required: in the case of LLP, there is no such mandatory requirement. This is perceived to be a significant compliance benefit. A Limited Liability Partnership is required to get the tax audit done only in the case that:-
- The contributions of the LLP exceed Rs. 25 Lakhs, or
- The annual turnover of the LLP exceeds Rs. 40 Lakhs
- Easy Bank Finance: Compared to other business models such as sole proprietorship, Partnership. LLP easily gets bank funding. LLP can raise money easily from Banks, Financial Institutions, Angel Investors, venture capital firms, private equity firms, etc.
- Government Schemes: Various schemes launched by the government of India such as Start-up India, Make in India, etc to promote corporatisation.
C. Minimum requirements to register LLP:
- Unique name of LLP: The proposed name of the LLP should be unique and should not be similar or identical to an existing company or LLP or Registered Trademark. (Recommended to provide at least two names on a preference basis)
- Minimum two Partners: A LLP can be registered by at least two persons, who shall act as the Designated Partners of the LLP, and out of which at least one partner must be resident in India.
V. MICROFINANCE COMPANY UNDER SECTION-8
INTRODUCTION
Section 8 Microfinance companies offer small loans to various small businesses or households that do not have access to formal banking channels or eligibility for loans. The main object of the section 8 microfinance companies are to reduce the poverty in the country, they facilitates the hassle-free loans without more paper works and procedures. Registration of microfinance companies under section 8 is the most suitable option when you want to start a finance business across India without RBI approval and capital restriction.
Section 8 microfinance companies can be started with microfinance objects and social objects to
COMPARATIVE ANALYSIS OF NBFC V/S SECTION 8 MICROFINANCE COMPANY
| Prerequisites | NBFC | Section 8 Company |
| Approval of RBI | Mandatory | Not Required |
| Net Owned Funds | Minimum 5 Crores | No minimum requirement |
| Director experience | One director must have experience of more than 10 years in financial services | No prior experience Required |
| Complexity of Microfinance Company Registration | All processes involved in forming a company have to be performed. | Relatively simple as it is registered as a non-profit organization |
| Adhering to Compliances | It has to adhere to all compliances of an NBFC. | Adhere to compliance of RBI, but they are less stringent in comparison to NBFC |
| No of members | For a private limited company minimum of 2 For a public limited company minimum of 7 | Minimum of 2 members |
| Status of organization | Profit organization | Non-profitable organization |
ADVANTAGES OF SECTION 8 MICRO FINANCE COMPANY:
- No RBI approval required: Section 8 microfinance company is exempted to get the RBI Licence.
- Unsecured Loan: Section 8 microfinance companies have the special advantage to provide unsecured loans i.e., personal loan, group loan, etc.
- No area limitations: Like Nidhi company, section 8 microfinance company have no jurisdictional or working area restrictions. In simple, section 8 microfinance companies can be operated across India.
- Promoting Socio-Economic Growth: Micro finance companies promote socio economic growth as they are providing loans to needy people.
- Attractive Rates of Interest: Section 8 Microfinance Company may offer an attractive rate of interest on a loan provided, which can be up to 26 % p.a. on reducing value.
VI. NIDHI COMPANY
INRODUCTION:
Similar to Banks Nidhi Companies in India are allowed to borrow money from their members and lend money to their members. Nidhi Company can do lending borrowing, provide fund among its members. Nidhi Company are created for cultivating the habit of thrift and savings amongst its members.
Nidhi companies are minute when compared to the banking sector However a best option to provide loans, accept deposits and open saving accounts, Fixed Deposit account, Recurring deposit account for its members.
Nidhi company is governed by the Section 406 of Companies Act, 2013 and Rules framed there under.
- WHY TO FORM NIDHI COMPANY?
- Not Required any License from RBI: Nidhi Companies need to incorporate themselves as Public Limited Companies with the MCA. And it’s not mandatory for them to get an RBI license to operate.
- Limited capital requirement: Compared to formation of NBFC require at least 10 crore as initial net owned fund as mentioned in the Nidhi Rules, 2014, the minimum capital requirement to register a Nidhi Company is ₹ 10 Lakhs only.
- Best option for Small Financers to do Money Lending Business: Small financers prefer Nidhi Company because it is a much better option than Credit Co-operative Societies. It is easier to register a Nidhi Company, and it comes with all the benefits of a co-operative society.
- HOW WE HELP YOUR NIDHI BUSNIESS
Nidhi Company is 110% profitable business if management is proper and Company comply all the provisions as per Section 406 of Companies Act, 2013 and Rules framed thereunder, we assist your business in following ways:
- Setting Up of Business: We plan setup of your Nidhi Company at minimum possible cost.
- Addition of Members and needful Disclosures: We help you to setup-system for member addition and easily documentation to make it to 200.
- Nidhi Accounting: we help you with best Nidhi Softward and assist you with that, to tract your members, deposits, saving accounts, Fixed Deposit account, Recurring deposit account interest etc.
- Nidhi Advisory: Our team of professionals avaible for you to provide 365 days advisory to take correct step for your business.
- Nidhi Compliances: it is mandatory for Nidhi Company to report Registrar of Company in following forms:
- NDH – 1 Return of Statutory Compliance
- NDH – 2 Application to Regional Director and Intimation to Registrar
- NDH -3 application for Half Yearly return
- NDH -4
- AOC – 4
- MGT -7
