Incorporation

A company is an association of both natural and artificial persons incorporated under the existing law of a country. In terms of the Companies Act, 2013 a “company means a company incorporated under the Companies Act, 2013 (the Act) or under any of the previous company law” [Section 2(20)].

In common law, a company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives of its members. This has many advantages for a business and its owners, including protection of the owner’s assets, because the company is liable for its own debts. Other advantages include easy transferability of shares to another party through the sale of shares and the company has perpetual succession.

As per the New Companies Act, 2013, following types of companies may be formed :

  • Private Company
  • Public company
  • One Person Company
  • Nidhi Company
  • Dorman Company
  • Producer Company
  • Foreign Company

Out of the above Private company is considered to be the best option for a Start- Up to begin its business operations, a Private Company has the foremost advantage of having a corporate structure, easy accessibility for the infusion of funds via private equity, venture capital, obtaining loans from the financial institutions such as Banks, NBFC’s, easy transferability of shares, protection of the rights of the shareholders, lesser compliances, simple mechanism of the governance by the management and easy to operate.