Private Limited Company
A Private Limited company is the simplest form of company, which requires minimum 2 directors. It offers all the benefits listed above, but the only constrain is that it can not be listed it in the stock market.
Public Limited Company
A Public Limited Company requires minimum 3 directors, and with the approval of SEBI and MCA, it can be listed in the stock market to raise public funds..
Non-profit / Section 25 Company (NGO / NPO)
A Non-Profit Organization (NPO / NGO) or a Section 25 Company can be formed for promoting any object like education, sports, research activities, commerce, art, religion, science, charity etc. Here Non- Profit does not mean that the company cannot earn profit, but it essentially means that any profit generated by the company should be utilized for promoting the objects of the company and should not be distributed to the promoters.
These companies offer some additional benefits like -
Section 25 Companies need to follow certain key conditions as given below -
Limited Liability Partnership (LLP)
A Limited Liability Partnership (LLP) combines the benefits of both, Partnership and the Company into a single organization, and offers following additional key benefits -
Less compliances thus lower cost of compliance compared to Private limited Companies
No minimum capital contribution required
Can have any number of partners
An LLP is allowed to partner with body corporate
Easy to wind-up and Less Government Intervention
A Public / Private limited company has several advantages over partnerships and proprietorships, as detailed below
Limited Liability of Directors and Shareholders
In the event of any failure of the business, the personal assets of proprietor or the partnership firms may be at risk. But a company isolates them from such unfortunate events, as their liability will be limited by their direct exposure to the company, thus offering security during crisis.
Company as a Legal Entity
A private limited company has got the status of a legal entity, and has separate existence from its members and directors. A private limited company status is generally taken more seriously by the customers, suppliers and employees, than a partnership/proprietorship firm.
The company has got a perpetual existence. Hence even if original promoters and directors are gone, the company exists, unless it is wound up complying with the law.
In case a businessman wants to sell his company, he just has to transfer the shareholding to the buyer. This saves a lot of time and money as no stamp duty need to be paid.
Confidence to Lenders
Generally banks and financial institutions find it more comfortable to lend to a company form of organization instead of individuals. So for entrepreneurs, where the need high capital and there is high amount of ineherent risk involved in the business, incorporation of a company help in arranging finances.
A company has got better borrowing capacity that individuals or proprietary/partnership firm. It can accept deposits from public, issue debentures and enjoys better creditworthiness with lenders.
A company can make a valid and effective contract with any of its shareholders. A person can also control the company, at the same time be an employee of the company. Thus a person can be a director, creditor, shareholder and employee of a company, and can receive, remuneration, interest, dividend, lease rent etc.
Raising Money from Public
A Public Limited Company can issue share to general public to raise large amount of capital. A Private Limited Company can adopt the private placement of shares and deposits to raise capital.
A company pays Corporate tax, instead of Income tax. There are several tax deductible costs and allowances which a company can avail to offset against its profits.