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The Companies Act of 2013 in India defines a company under Section 2(20) as “a company incorporated under this act or under any previous company law”. This means that any corporation which is incorporated and registered under this Act or other previous Company Act will be called as a company. A company is considered to be an artificial legal person which has an independent legal entity and a common legal seal for its signatures.
One may be curious about “What does LLC stand for,” “Which entity should I choose,” “What is Inc., “What does Co. mean,” “What is LLC,” or “Ltd vs. LLC?”. Before one incorporates a company, he needs to choose the type of entity that is suitable for him. Businesses are incorporated at the state level, and incorporation law for a company varies according to the state in question.
What Co. means
Co. is an abbreviation for company, a phrase for an association of people that work together in a commercial setup or in an industrial enterprise. It includes various business structures, such as in a sole proprietorship, limited liability partnership, limited liability company or corporation. The abbreviation Co. like the word company does not carry meaning as a specific legal structure.
What Inc. and Corp. means?
Inc. is the abbreviation for incorporated and Corp. is short for corporation. They are both used in the names of incorporated entities. When one registers a business, they can use either of the business names. In terms of the legal structure, obligations, limited liability or the tax structure, there is no difference between the two. However, they cannot be used interchangeably. Once an institution is registered with Corp. or Inc. in the company name, the same must use this extension in all its legal paperwork.
Both Inc. and Corp. represent an institution that is granted a charter recognizing it as a separate legal entity having its privileges, and liabilities distinct from those of its members. An important feature of both is limited liability, which means that the shareholders, directors, employees are not personally liable for the debts that the institution owes to the creditors. The company, if, it is a Corp, or an Inc comes into existence when its founders comply with their state’s incorporation process.
An incorporated company/ corporation is a separate legal entity from the person or people forming it. Directors and officers perform the tasks of purchasing shares in the business and have responsibility for its operation and conduct. Incorporation sets limits on an individual’s liability in case of a lawsuit. The corporation, as a legal entity, is liable for its debts and pays taxes on its earnings and can also sell stock to raise money. A corporation is able to continue as an entity after the death of a director or stock sale. A corporation is formed according to state law, through an application to the secretary of state and filing articles of incorporation. Corporations include heavy expenditure for more to administer and are legally complex, the U.S. Small Business Administration recommends that small businesses not incorporate unless they become established as a large company. In most states, corporations are under an obligation to add a corporate designation, such as Inc. after their business name.
What Ltd. means
A limited company can be abbreviated to Ltd. This structure is used mostly in European countries and Canada. Here, directors and shareholders have limited liability for the debt of the company, as long as the business operates within the law. Its directors pay income tax, and the company pays corporation tax on profits. The term is used interchangeable with Inc. or incorporated. Responsibility for a company’s debt is usually limited to the amount a person has invested in the company. In some companies, a shareholder’s liability is limited to specific predetermined amounts, drawn up in a memorandum. These businesses are known as “private company limited by guarantee,” and shareholders are called guarantors. This structure is frequently used by charities and social enterprises. In England, limited companies have a pay-as-you-earn system which has been established for collecting income tax payments and National Insurance contributions from all employees.
Private Limited Company
Private Limited Company is a joint-stock company. However, it is governed under the ambit of the Indian Companies Act, 2013. It is formed by a voluntary association of persons with a minimum paid-up capital of 1 lakh rupees. While the maximum number of members is 200, it does not include the current employees or ex-employees who were members during their employment terms. Employees may continue to be a member after they terminate employment in the company. Transfer of shares is restricted. It prohibits the entry of the public through the subscription of shares and debentures. The term private limited (Pvt. Ltd.) is used at the end of its name. A Private limited company is formed legally with limited liability or legal protection for the shareholders but that acts as restrictions on its ownership. A Private Limited Company is a company where the liability of the members of a Private Limited Company is limited to the number of shares respectively held by them. The shares of Private Limited Company cannot be publicly traded. Private Limited Company is a simple and immensely popular form of business registration in India. It can be registered with a minimum of two people. The limited liability protection to shareholders, ability to raise equity funds, separate legal entity status makes it the most recommended type of business entity for small and medium-sized businesses. Some might be family-owned or professionally managed.
Minimum Requirements for Private Limited Company
- A minimum number of two Directors who are adults.
- One of the Directors of a private limited company has to be an Indian Citizen and Indian Resident.
- The other director(s) can be a Foreign National.
- Another requirement is that there should be two shareholders of a company.
- The shareholders can be natural persons or an artificial legal entity.
Private Limited Company Registration Process
Registration of a Pvt Ltd company in India can be completed by an online process. The MCA had replaced the previously SPICe form with a new form called SPICe+ (SPICe Plus). So, incorporating a Private Limited Company is considered quite easier now. It is possible that one can incorporate a Private Limited Company, with a single application for name reservation, incorporation, DIN allotment, mandatory issue of PAN, TAN, EPFO, ESIC, Profession Tax (Maharashtra), and Opening of Bank Account.
Public Limited Company
Public Limited Company is a joint-stock company. It is governed by the provisions of the Indian Companies Act, 2013. While there is no limit on the number of members, it is formed by the association of persons voluntarily with a minimum paid-up capital of 5 lakh rupees. Transferability of shares have no restriction.
Features of Public Limited Company
- The company can invite the public for the subscription of shares and debentures.
- The term ‘public limited’ is added to the name of the company during the process of incorporation.
- A public limited company is a voluntary association of members which can be incorporated by seven or more persons.
- It has separate legal existence apart from its members who compose it.
- It must have a minimum of seven members but there is no limit as regards the maximum number.
- Its shares are freely transferable and that too without the prior consent of other shareholders. It is an independent legal person, its existence is not affected by the death, retirement, or insolvency of any of its shareholders.
- These companies have the authority to invite capital as well as deposits from the public.
- These Companies can be listed or unlisted.
- Minimum Seven People: Minimum seven people are required to start the public limited company in India. These companies shall have a minimum of three directors. The same seven people can become shareholder and director of the company. However, the maximum of any number of people can become a shareholder in the public limited company.
- No Minimum Capital: Capital of the business is depending on the need of the business and statutory no minimum capital is required to start the public limited company. However, minimum authorized and subscribed share capital required for a public company is Rupees five lakh.
- One Resident Director: Among the director, one person must be a resident Indian.
- Unique Name: The name of the public limited company should be unique and should not be similar to any existing company name or trademark.
Limited Liability Companies
LLC is an abbreviation of “limited liability company”. An LLC is a type of company where some features of both business partnerships and corporations, although it is more like a partnership. Owners, also known as members, are protected from liability and the business’s earnings and losses are handled by the owners. They report them on their income taxes. This makes its structure less complex than that of a corporation, but as a corporation, LLCs must offer stock. Members share profits as they like. Members are considered self-employed and must pay self-employment tax. When a member of the LLC leaves, the business is dissolved, and the remaining members decide if they want to start a new business. An LLC is also formed according to state law, through application to the secretary of state and filing articles of incorporation. LLCs must also show that are an LLC or limited company, in their name. Limited Liability Company is another category of the company registered under the Indian New Companies Act, 2013. It is often called a Limited Liability Corporation and its nature of business is quite similar to partnership firm and sole trade business. Company is an association of persons or an artificial person formed under the Indian Companies Act to carry out a certain business. Liability is limited among members or partners of the company and no one is responsible for other’s misconduct and responsibilities in any case, as mentioned in the act. Limited liability company registration has been extensively growing due to its many advantages over another form of business enterprises.
Moreover, The Supreme Court of India in the case of R C Cooper v. Union of India had held that company is an artificial person. Therefore, the shareholders or members of the corporation cannot be held liable for it.
Limited liability company registration services are available in India as company formation is at a quick pick among Indian entrepreneurs. The new Companies Act, 2013 has defined all rules and regulations regarding incorporating and registering all limited liability companies for instance the Limited Liability Partnership Act, 2008. One may apply to the Registrar of Companies (RoC) by giving all the details regarding company including the name of the company, name, and address of board of directors, location of the company as per the company registration services. India as a business destination has been immensely growing and there are large numbers of business entrepreneurs are coming to India to kick start variety of business. One can register a company either directly through online or can take the help of a professional like a trademark or patent lawyer to make this process smooth.
In many states there are no restrictions in ownership, meaning anyone can be a member including individuals, corporations, foreigners and foreign entities, and even other LLCs. Some entities cannot form LLCs, like; banks and insurance companies. An LLC is a more formal partnership arrangement that requires articles of organization to be filed with the state. An LLC is much easier to set up than a corporation and provides more flexibility and protection. LLCs may elect not to pay federal taxes. The profits and losses are listed on the personal tax returns of the owner of the company. Further, LLC may choose a different classification, like a corporation. If fraud is detected or if a company has not met legal and reporting requirements, creditors may be able to go after the members.
 R C Cooper v. Union of India ,1970, A.I.R. 564. (India).