Types of Company with example, classification (10 Important Things to know)

‘How many types of company are there?’ This question arises to many. When it comes to starting a business, having a right corporate structure is essential. However not many realize the same and end up with a complex business structure. Having a complex business structure can have adverse effects on decision making, capital raising, compliance, business expansion etc.

Although you can change the company’s structure later but it does come at a monetary cost. Hence having a proper knowledge of type of companies could help in having a right corporate structure. In this article let us deal into types of companies with examples. After reading this article you will get to know as to what type of company would be suitable for you when starting or scaling your business.

Types of company can be classified based on various categories.

A) Types of Company on the basis of Liability

Company limited by Guarantee – Company where members agree in a memorandum upon a stipulated sum to contribute to company in the event of it being wound up. Here, the personal assets of the members remain unaffected and they are accountable only up to the stipulated sum that they had agreed upon in the memorandum.
Company limited by Shares – Company where members’ liability is limited according to memorandum of association to the amount unpaid on the shares held by them. Here company is a separate entity from its members and members cannot be called upon to pay company’s debts.
Unlimited Company – Company does not have any limit on members’ liability. The liability of a member ends when he ends up being a member. The liability of a member extends to whole of company’s debts and liabilities.

B) Types of Company on the basis of Listings

Listed Company – A Company which has any of its securities listed on any of the recognized stock exchanges.
Unlisted Company – Company other than listed company. Here unlisted company can be 10 member company or even 50 member company.

C) Types of Company no the basis of Incorporation

Statutory Company – Companies that have been created under a special act of the legislature. The provisions of Companies Act 2013 do not apply to them unless specified. E.g – Reserve Bank of India.
Registered Company – Companies formed, registered under Companies Act 2013. These also include companies that have been registered under the previous Companies Act.

D) Types of Company on the basis of control

Holding Company – A company or a body corporate of which other companies are subsidiary companies.
Subsidiary Company – A company in which the holding company controls the composition of the Board of Directors. In addition to that the holding company also controls more than one-half of the total voting power either alone or with its other subsidiary companies.
Associate Company – A company in which other company holds a significant influence, but is not a subsidiary of that company.

E) Types of Company on the basis of members

One Person Company ( OPC ) – A company which has only one member. This type of company is particularly suitable to sole proprietors. The purpose of introducing OPC is to enable solo entrepreneurs enter into corporate framework.
Private Company – A company that is a separate entity hold privately and whose profits/liabilities belong to the company. Here members are not responsible for debts incurred by the company.
Public Company – A company that is not help privately. A company where seven or more members are required to form the company.
Small Company – A company whose paid up share paid-up share capital of which does not exceed Rs. 4 Crores or such higher amount as may be prescribed which shall not be more than Rs. 10 Crores. Also, The turnover of which as per its last profit and loss account for the immediately preceding financial year does not exceed Rs. 40 Crores or such higher amount as may be prescribed which shall not be more than Rs. 100 Crores.

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F) Types of Company on the basis of Function

Nidhi Company – Company which lends and receives money from its members only for their benefits and which is created for encouraging savings amongst the members and complies under Section 406 of the Companies Act 2013.
Sectoral Company – A company which is registered under a sector that is regulated by authority of the government. E.g- A banking company. It has to follow Banking Regulation Act as well as RBI directives.
NBFC(Non-Banking Financial Company) – A NBFC is engaged in business of lending, stocks, debentures, insurance, hire purchase, leasing but does require banking license. E.g- Bajaj Finance
Banking Company – A company governed by Banking Regulation Act 1949 and registered under Comapnies Act 2013. A banking company has to obtain banking license from Reserve Bank of India. E.g – State Bank of India
Insurance Company – A company governed by Insurance Act 1938 and registered under Comapnies Act 2013. An insurance company has to obtain insurance license from IRDAI(Insurance Regulatory and Development Authority of India). E.g – United India Insurance
Non Profit Company – A company formed for promotion of child education, sports, religion, charity, welfare, environment protection etc. and registered under Section 8 of the Companies Act 2013. E.g – CRY(Child Rights and You)

G) Other types of Company

Government Company – A company in which not less than 51% of the paid-up share capital is held either by Central Government, one or more State Governments, or partly held by central and state governments and a company which is a subsidiary of such company. E.g – ONGC India
Foreign Company – A company or a body corporate incorporated outside India which has – a) place of business in India whether by gent or through itself either in physical mode or in electronic mode. b) conducts any business activity in India
Dormant Company – “Dormant” means inactive. A dormant company is formed to hold an asset or intellectual property or formed for future project and has no significant accounting transaction.
Joint Venture Company – A company formed on the basis of a joint venture agreement between two or more companies and has JV partners sharing responsibility.

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