Which forms of business are companies?
A company is a body incorporated under the Companies Act, 2013. The forms the Act names for most businesses are a private company, a public company, a one person company, and a company with a section 8 licence. A partnership, an LLP, and a proprietorship are not companies.
Which forms are companies?
| Form | What sets it apart |
|---|---|
| Private company | Restricts transfer of shares, limits members to 200, and does not invite the public to subscribe |
| Public company | Is not a private company. It needs at least seven members and three directors |
| One person company | Has one member. It is a private company with that one member |
| Section 8 company | Has a licence to apply its profits to its objects and not to pay a dividend |
How each one is formed is on the private-company page, the public-company page, the one person company page, and the section 8 page. A company may be limited by shares, limited by guarantee, or unlimited. Most trading companies are limited by shares.
What is not a company?
A proprietorship is the owner. A partnership firm is under the Partnership Act. An LLP is under its own Act and is compared with a firm on the LLP page. None of those three is incorporated under the Companies Act, and none of them becomes a company by being called one.
Frequently asked questions
Four questions cover an LLP, a partnership, a section 8 company, and a public invitation.
Is an LLP a company?
No. An LLP is registered under the Limited Liability Partnership Act, 2008. It is not a company under the Companies Act.
Is a partnership a company?
No. A partnership firm is under the Partnership Act, 1932. It is not incorporated, and the partners do not have limited liability.
Can a one person company be a section 8 company?
No. A section 8 company needs at least two members if it is private, or seven if it is public. A one person company is outside that licence.
Does every company invite the public to subscribe?
No. A private company is prohibited from inviting the public to subscribe for its securities. A public company may do so.
Sources
A company is incorporated under the Companies Act, 2013. Private, public, and one person companies are defined in section 2. A section 8 company holds a licence.