Types of Company: Explanation of Different Types Of Companies

April 5, 2021January 16, 2023 Shyam Kumar 0 Comments

Types of Company can be classified on the basis of the mode of incorporation, the number of members, and the liability of the members.

The General Types of Company are:

On the basis of mode of incorporation of the company:

Chartered Company
Statutory Company
Registered or Incorporated Company

On the basis of Number Of Members in the company:

Companies Limited By Shares
Companies Limited By Guarantee
Unlimited Company

On the basis of the liability of members:

Public Company (or Public Limited Company)
Private Company (or Private Limited Company)
One Person Company

Types of Company on the basis of Mode of Incorporation:

Companies can be classified into three types based on the mode of registration or incorporation. These are:

1. Chartered Company

This type of company created by the Royal Charter. In other words, it is a company formed under a Royal charter ruled by the king or queen, made for the purpose of trade and exploration.

Examples of Royal Chartered Companies are BBC, East India Company, Bank Of England, etc.

2. Statutory Company

These types of companies are brought into existence by passing a special act under central or state legislature. Generally, this type of company is fully financed by the government and formed generally to work on the business that helps in the development or service of the nation.

Examples of statutory companies are SBI, Air India, Life Insurance Corporation of India, etc.

3. Registered/Incorporated Companies

All the other companies which are incorporated under the companies act, 2013 with the ministry of corporate affairs are known as registered/Incorporated Companies. These companies are brought into existence only by registering themselves under the companies act.

Examples of Registered Companies are Wipro, Adobe, etc.

Types of Company on the basis of Number of Members:

Companies can be classified into three types based on the basis of the number of members. These are –

1. Public Limited Company

A Public Limited Company under Company Act 2013 is a company that has limited liability and offers shares to the general public. In this, the existence of a company is separate from its members (Shareholders). The liability of members is limited only to the amount of investment they have made in the company. A minimum of 7 members is needed to form a Public Limited company but there is no maximum limit on this. All the major decisions of the company are taken by the Board of Directors of the company. This type of company raises money through the issue of shares to the public.

Examples of public limited companies are F5 Networks, Inc., Google LLC, etc.

2. Private Limited Company

Private limited companies are those company which is privately held by a small group of people. This is also a separate legal entity where the liability of the members is limited. This type of company requires more than 2 and less than 200 members. In this, the general public cannot buy a share of the company.

Examples of private ltd. Companies are Flipkart, Ola, etc.

This is the most popular type of company for start-ups & businesses all over the world.

Also Read: How to Start your Startup [Complete Guide]

3. One Person Company

One Person Company (OPC) is similar to sole-proprietorship but unlike a sole proprietorship, where the owner has limited liability and so his/her personal assets would not be at risk of losses that need to be recovered or if the company is (closed)liquidated.

Types of Company on the basis of Liability of the Members:

While liquidation, the members of a company are either liable to pay even from their personal assets if the loss amount is more than the face value shared by the holder or to the extent of the face value of shares held. This depends on the mode of registration of the companies.

Also Read: How to Start your Startup [Complete Guide]

Companies can be classified into three types, based on the liability of the members. These are:

1. Companies Limited by Shares

In this case, the liability of the shareholders is limited to the extent of the face value of shares held by him/her.

2. Companies Limited by Guarantee

In this case, the liability of the shareholders promises to pay a certain fixed amount to cover the liabilities of the company during liquidation.

3. Unlimited Companies

In this case, there is no limit on the liability of the shareholders. In case of liquidation, they might have to pay even from their personal assets to cover the liabilities of the company if the loss incurred is more than the face value of the share held by the shareholder.