BUSINESS ORGANIZATION

Sole Proprietorship

Partnership

Private Limited Company

Public Limited Company

Charitable Organization
Types of Business Entities
No registration required


Unlimited liability


Used for small business or by Professionals


No Separate Legal Entity
Sole Proprietorship
Section 11 of Companies Act, 1956

No partnership consisting of more than 20 persons shall be formed
Partnership
Indian Partnership Act, 1932

Section 4 Partnership is the relation between persons who have agreed
to share profits of business carried on by all or any of them acting for all
Unlimited Liability
Registration not Compulsory
Partnership
Under the Income Tax Act 1961, the Partnership firm is taxed as a
separate entity, distinct from the partners.
In the Act, there is no distinction between assessment of a
registered and unregistered firms. However, the partnership must
be evidenced by a partnership deed.
The partnership deed is a blue print of the rights and liabilities of
partners as to their capital, profit sharing ratio, drawings, interest
on capital, commission, salary, etc, terms and conditions as to
working, functioning and dissolution of the partnership business.
Governing Act Companies Act, 1956


Company
Special Features of Company

a) Company is a Separate Legal Entity
b) It can sue and be sued in its own name
c) The liability of the shareholders are limited to the extent of
their shareholdings
d) Company is distinct from its shareholders
e) It can hold property in its own name
f) Any Dividend Income received from an "Indian Company"
is totally exempted from Income Tax under section 10
(34) of Income tax Act and Income from Mutual funds is
exempted under section 10(35)









Types of Companies in India
DESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY
Definition Which by its article restricts:
Numbers of members to 50
Transfer of shares
Cannot give Invitation to public
to subscribe its debenture, shares
etc.
Acceptance of deposits from
person other than its shareholders
and directors


Which is not * private

Governing Laws



Companies Act, 1956 Companies Act, 1956
SEBI Act, 1992 and allied
laws.


Types of Companies in India
DESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY
Incorporation
Time
2 to 3 weeks

2 to 3 weeks
Minimum Paid up
Capital


INR 1,00,000/-
INR 5,00,000/-

Maximum No. of
shareholders


50 (Fifty)

No limit

Minimum No. of
Shareholders


2 (Two)
7 (Seven)

Transferability of
Shares


Restricted Freely. If company is listed
then through stock
exchange(s)

Minimum No. of
Directors


2
3

Types of Companies in India
DESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY
Whether a
Foreigner can
be Director
Yes


Yes
Whole Time
Director (WTD) /
Managing
Director (WTMD):
Appointment


Appointment not
compulsory and
No restriction on
appointment
Appointment :
Not compulsory, If
paid up capital < Rs. 5 Cr.
Compulsory. If
paid up capital => Rs.5 Crs


WTD / WTMD:
Remuneration


No restriction As per schedule XIII,
otherwise permission of
Central Government.
Foreigner as
WTM D / WTD


No restriction With the approval of
Central Government

Types of Companies in India
DESCRIPTIONS PRIVATE COMPANY PUBLIC COMPANY
Loan to
Director etc.
Yes

With the previous
approval of Central
Government
Contracts with
Director etc.



Yes With the consent of Board,
If paid up capital of the
company is (One) 1 Cr. or
more, approval of Central
Govt. is necessary
Loan, Investment
& Guarantee by
the company


No restriction
Some restrictions
Charitable Organization
- Trust

- Society

- Section 25 Company

It can do business and earn any amount of profits, but the
distribution of profits cannot be made to Shareholders /
trustee
Regulatory Bodies in India
Foreign Investment Promotion Board
(FIPB)
Reserve Bank of India (RBI)
Security Exchange Board of India (SEBI)
Registrar of Companies (RoC)
Trade Mark Registry (TMR)
Director General of Foreign Trade (DGFT)
How a Foreign Company can enter
into India?
Liaison Office
Branch Office
Project / Site Office
Joint Venture
100 % Wholly Owned Subsidiary
Liaison Office
Permitted activities for a Liaison Office in India

Representing in India the parent company/group
companies.
Promoting export import from/to India.
Promoting technical / financial collaborations
between parent / group companies and companies
in India.
Acting as a communication channel between the
parent company and Indian companies.
Procedure for setting up Liaison Office

Apply in Form FNC-1 in quadruplicate to RBI
English version of the certificate of incorporation /
registration attested by Indian Embassy / Notary public in
the country of registration.
Latest balance sheet of the applicant company / firm.
Certified photo-copy of the agency Agreement, if any, with
parties in India.
Photo-copy of the Agreement / draft- Agreement /
correspondence indicating the terms of appointment of the
proposed representative duly authenticated by the applicant.
Where applicable, certified photocopy of Government of
Indias approval for undertaking projects in India.
Where applicable, certified photocopy of the contract /
Agreement for undertaking activities / rendering services.
Liaison Office
Conditions Imposed While Granting Permission

No commission / fee will be charged or any other
remuneration received by the Indian office of the foreign
company for its liaison activities in India.

Except the liaison work, the office will not undertake any
activity of a trading, commercial or industrial nature
without the prior permission of RBI

The entire expenses of the Indian office will be met
exclusively by remittance from abroad through normal
banking channels.
Branch Office
Permitted activities
Export/Import of goods
Rendering professional or consultancy services.
Carrying out research work, in which the parent company is
engaged.
Promoting technical or financial collaborations between Indian
companies and parent or overseas group company.
Representing the parent company in India and acting as
buying/selling agent in India.
Rendering services in Information Technology and
development of software in India.
Rendering technical support to the products supplied by
parent/group companies.
Procedure for setting up Branch Office Same as Liaison Office
Joint Ventures
Joint Ventures are of two types
a) Incorporated Joint Ventures
b) Contractual Joint Ventures
a) Financial Joint Venture
b) Technical Joint Venture

Essentials for Joint Ventures
- Name of the JV
- Shareholding Pattern
- Funding and Financing of JV
- Constitution of Board of Directors, Powers of Directors, Meeting
- Transfer of shares, right of refusal, buy out provisions
- Non disclosure, non competition, IPRs
- Governing laws, Dispute resolution
Joint Ventures
Verify Limit of FDI permitted in
proposed JV
Drafting of MoA & AoA in accordance
with JV Agreement
Incorporation of JV company
Private & Public JV Company
100% Wholly Owned Subsidiary
Verify FDI for 100% WOS

Incorporation of WOS

Private & Public WOS