The incorporation of the company refers to the legal process, which is used to form the corporate entity or company. Company incorporation indicates that it can be identified with the terms like inc, limited in their names. The primary benefit of the company incorporation is limited liability. When you are planning to own a small business, you will invest lot of money into it not only for taking the benefit but also for smooth running of the business.
Different Types of Company Incorporation
There are companies which are different types based on the liability. They are company limited by shares, company limited by guarantee and unlimited company.
Company limited by shares
In this structure of company the capital can be introduced in the form of shares. Shares are nothing but the capital of the company is divided into small portion which is called as shares. If suppose the capital requirement is needed for the company the shares can be issued by the shareholders. In this kind of the company the liability of the members, is limited to the unpaid capital on the shares which are subscribed.
Company limited by guarantee
Where the capital is not divided into shares, the company can be said as private limited company or public limited company. In this kind of the company, the capital can be limited upto the amount of amount guarantee.
In this kind of company the liability of the members is not limited. In case if there arises any debt, liability of the members does not get limited to their part rather it gets extended to their personal assets also. Hence, it is understood, that this kind of companies are nowadays not preferable to get registered. Also the liability of the members arises only at the time of winding up or bankruptcy. The most popular type of company is company limited by shares.
Kinds of companies based up on the number of members.
Companies such as a private company and a public company are generally known based on the number of members (shareholders). In any company other than OPC, membership can be maintained by any individual or body corporate. Foreign nationals or NRIs can also become members of such organizations.
For a private limited company, the minimum number of members is 2, which can be extended up to a maximum of 200 at a time. The stated legal limit needs to be adhered to at all times. Understand here what a Private Limited Company in India is.
One Person Company:
One type of private company, a one-person company is commonly called an OPC. OPC differs significantly from other types of companies due to the number of members. In the OPC, there is only 1 member at any one time during its existence. Here, this member can be an individual and resident of India..
In a public company, there is no limit to the maximum number of members. However, a minimum number of members is provided. A public company is registered with at least 7 members. Companies listed on the stock market are such public companies. Such companies can attract funds from the public through public offers (IPO or FPO).
Other kinds of companies
As the name suggests, the foreign company is owned by foreigners. A company is registered as a foreign company when its foreign shareholding exceeds 50%. Businesses registered outside India find the most accessible way to set up a business in India. Such businesses are registered as an Indian subsidiary of a foreign company.
Section 8 Company:
It is registered as a company under Section 8 of the Companies Act; Hence, Section 8 is called Company. Section 8 company incorporation is for voluntary purpose and as a non-profit organization. Such a company receives special status and certain exemptions as it is registered as a Section 8 company. I bring to your notice that for Section 8 Company Registration, special permission is required from the concerned authorities.
The foreign company is a company registered primarily to address the primary production of its active member related to agriculture. The main objective is to have the product for its sale and export. A foreign company is registered as a producer with ten or more members; Or any two or more producer companies; Or a combination thereof. Like any other organization, the liability of its members is limited to the share capital not paid by its members. Under this Act the Producer Company is treated as a Private Limited Company, however, the limit of the number of members does not apply to it.
It is said to be Small company if a special status given to registered companies. You do not have to merge the new company, but the status it has acquired due to its financial and other positions.
Referred to as an affiliate, it controls the composition of the board of directors of the other body or more than 50% of its voting powers. If a single holding company holds 100% of the voting rights, the subsidiary is called a wholly owned subsidiary (WOS).
A holding company is a company that has the authority of another company or a high percentage of voting power (subsidiary as mentioned above). The holding company is also known as the parent company.Forms of company incorporation have become very popular over the years. Their development has led to the creation of many new types of companies. Companies should be classified on the basis of responsibilities, members and control. When company incorporation is done it helps to generate capital.
In an organised form of the company money is the capital needed to produce goods and services. Special Entity. A company is a separate legal entity for the following shareholders. The company is limited to their liability. Also the transfer of shares is also easy when it is formed as a company. To the stakeholders like promoters, Directors and shareholders the company is a separate legal entity. Hence company incorporation has the above said advantages.