Insight on Types of Companies

Insight on Types of Companies

A firm exists in law as a separate entity from its owners. According to this, a corporation’s owners are not held individually responsible for the debts and liabilities of the corporation. There are several different types of companies, each with its own guidelines. One-person companies (OPCs), public limited companies (PLCs), and private limited companies (Ltds) will all be discussed in this blog. These three companies will be compared, and their benefits and drawbacks will be addressed.

One-Person Companies (OPCs)

An OPC is a company with just one member. The member may be an individual or a legal entity. A member of an OPC may also act as a director of a corporation. OPCs are a relatively new type of company in India. They were included in the Companies Act of 2013. OPCs provide a variety of benefits for startups and small companies.

Benefits of OPC

•Easy Formation: Forming OPCs is not very difficult. An OPC needs Rs. 1 lakh in paid-up capital to operate.
•Limited Liability: The members of an OPC have limited liability, meaning they are not held individually accountable for the debts and obligations of the company. In the case of the company’s insolvency, this implies that the member’s assets are safeguarded.
•Versatility: High levels of flexibility are provided by OPCs. The management structure and operational procedures of an OPC may be decided by its members.

Drawbacks of OPCs

• Lack of Finance: It may be challenging for OPCs to obtain support from outside sources. This is so investors can invest in a company with more than one person.
• Limited Marketability: OPCs are not listed on stock exchanges, which limits their marketability. This translates to a lower level of marketability than public limited companies.
• Ownership Restrictions: A single person may get up to one OPC’s shares. If an OPC member wishes to sell their shares, this may be a drawback.

Public Limited Companies (PLCs)

PLC is a company that accepts public subscriptions. The shares of PLC can therefore be purchased and sold by anybody. PLCs have a variety of benefits for companies looking to raise money from the public.

Benefits of PLCs
• Large Capital Base: PLCs can obtain substantial funding from the general population. This may aid business development and expansion.
• Marketability: They are very marketable due to PLC’s stock exchange listing. As a result, it is simple to buy and sell their shares, and they are thus commercial.
• Adaptability: The degree of flexibility provided by PLC is excellent. A PLC’s management structure and operational policies are subject to approval by the shareholders.

Drawbacks of PLCs

• Requirements for Compliance: PLCs must adhere to stricter regulations for compliance than other company kinds. This might be a drawback for companies that need more means to meet these standards.
• Shareholder Liability: In a PLC, each shareholder is responsible for the debts and obligations of the company up to the value of their ownership. As a result, the shareholder’s assets are not safeguarded in the case of the company’s bankruptcy.

Private Limited Companies (Ltd)

An Ltd. is not accessible to the public subscription. Accordingly, only the company’s members are permitted to purchase and sell shares of an Ltd. The most prevalent company in India is the Ltd., followed by OPCs. Ltds have a lot of benefits to offer when a company wants to raise money from a select group of investors.

Benefits of Ltds

• Easy to Setup: Ltds are simple to create. An Ltd needs Rs. 1 lakh in minimum paid-up capital.
• Restricted Liability: The debts and obligations of Ltd are not personally owed by the company’s members. In the case of the company’s insolvency, this implies that the member’s assets are secured.
• Flexibility: Ltds have a lot of flexibility to offer. An Ltd’s members can choose the company’s management team and operating procedures.

Drawbacks of Ltds

• Lack of Money: It may be challenging for Ltds to obtain financing from outside sources. This is because investors may hesitate to invest in a company that is not in stock.
• Increased Compliance Obligations: Pvt. Ltds are subject to stricter compliance obligations than partnerships or sole proprietorships. This is because they are incorporated organizations.

Difference Between OPC, PLC, and Ltd

Conclusion:

What kind of company to incorporate depends on the business’s demands. A PLC could be the ideal choice if the company wants to access a sizable pool of money. An OPC can be the perfect choice for the organization if it needs to control and keep its compliance obligations to a minimum. An Ltd can be your best choice if your company has to strike a balance between these two considerations.