Types of Company

Classification of Companies

Companies are generally classified on the basis of liabilities, members, and on the basis of control. These categories are broadly defined below in a very detailed manner.

Different Types of Companies

Companies on the Basis of Liabilities

This sub-category includes companies limited by shares, by guarantee or simply unlimited. In companies which are limited by the shares, the liabilities of the members are limited to the amount and percentage of shares they have invested in the company. It is limited to the extent of the amount not paid by them on their shares. In case of winding up, the members will be liable only until they pay the remaining amount of their shares.

However, in some companies, the MoA decides the amount of money that the members have to pay. In case of winding up of the company, they are only liable to pay the amount so guaranteed. The creditor cannot compel them to pay the extra amount.
In the case of unlimited companies, there aren’t any restrictions and limits on members' liabilities. The company can use all of the personal assets of the shareholders.

Companies on the Basis of Members

This sub-category includes one-person companies and private and public companies. IN OPC or one person company, only one person is the sole shareholder of the company. As the name suggests, they are different from sole proprietorships because they are legal entities that are distinguishable from their sole members. OPC doesn’t need to have any minimum share capital.

Private companies are those companies whose AoA restricts the free transferability of shares. These types of companies need to have a minimum of 2 and a maximum of 200 members. Public companies unlike private companies allow their members to freely transfer their shares. These types of companies need to have a minimum of 7 members that can go up to an unlimited number. There is no limit to the maximum number of people in a public company.

Companies on the Basis of Control or Holding

This sub-category includes holding or subsidiary companies or associate companies. In some types of companies, some shares are owned by another company. Here, the company owning the shares becomes its parent company and the company whose shares are owned by the parent company becomes the subsidiary company. For example, Google is a subsidiary of the Alphabet company.
In the case of holding companies, the parent company cannot exercise full control over the board of directors like in the case of subsidiary companies where the parent company owns more than 50 per cent shares of its subsidiary company.

While in associate companies, in these types of companies, other companies have significant influence over them owning at least 20 per cent of their shares. Associate companies can only exist under joint venture agreements.

Companies in Terms of Access to Capital

This sub-category includes two types of companies. These are listed and unlisted companies. Listed companies have their securities listed on stock exchanges. Public companies are types of listed companies where any person can freely buy their shares.
Private companies are the types of unlisted companies. Their shares are restricted and not anyone can buy their shares. However, both private and some public companies too can come under the purview of unlisted companies.

Types of Company Under Companies Act, 2013

Entrepreneurs are granted the flexibility to establish various types of companies under the Companies Act of 2013, which provides a legal framework for conducting business. These include:

1. One Person Company (OPC) This unique entity, introduced by the Act, allows a single member—who can also be the director—to form the foundation. Although an OPC is required to maintain just one member, it is permitted to appoint up to 15 directors.
2. Private Limited Company: For businesses that prefer limited membership, the private limited company is a choice. It limits membership to 200 or fewer. The incorporation requires a minimum of two members, and share transferability is restricted.
3. Public Limited Company: Designed for broader shareholder participation, the public limited company permits the general public to hold shares. Although there's no upper limit on shareholders, it necessitates a minimum of 7 members. Public limited companies require a minimum of two directors and allow a maximum of 15 directors.
4. Section 8 Company (NGO): People can register under Section 8 for charitable purposes. These companies aim to fulfil objectives such as education, welfare, and sports. Profits are allocated for promoting these activities.

Conclusion

Apart from these categories, there are other types of companies too. These include government companies where 50 per cent of shares are held by the government, either central or state government or sometimes by both, foreign companies which are incorporated outside the territory of India, charitable companies, dormant and Nidhi companies which are formed for the benefits of its own members.

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