How does a company work?
A company operates as a separate legal entity, managed by directors appointed by shareholders to oversee strategy, compliance and major business decisions. Shareholders own the company, while directors and employees handle its governance and daily operations.
The company earns revenue, pays expenses and reinvests profits to support growth. Eligible established businesses may use internal funds, investor capital or an MSME loan for inventory, hiring, technology and expansion.
Example
Priya, a 34-year-old entrepreneur in Pune, registered a private limited food-tech company under the Companies Act, 2013. After completing 3 years in business, she applied for a Rs. 25 lakh Bajaj Finance business loan to fund inventory and hire 10 employees. Her experience shows how to start company operations and prepare for future growth.
Features of a company
A company possesses several structural and legal characteristics that distinguish it from other business formats in India. These features, governed by the Ministry of Corporate Affairs (MCA), make the corporate structure one of the most reliable and scalable options for modern entrepreneurs.
Core features of a registered company
| Feature | Legal and structural explanation |
| Separate legal entity | A company exists as a "legal person" entirely independent from its shareholders. |
| Limited liability | Members are financially liable only to the extent of the unpaid amount on their shares. |
| Perpetual succession | The company’s legal existence remains uninterrupted, regardless of any changes in ownership or the death of a director. |
| Transferability of shares | In public companies, ownership can be easily transferred through the sale of shares on the stock exchange. |
| Corporate governance | The entity is professionally managed by a Board of Directors, ensuring a clear division between ownership and management. |
| Statutory registration | To exist legally, the entity must be incorporated under the Companies Act, 2013, and receive a Certificate of Incorporation (COI). |
Types of companies
- Public limited company: A public limited company company type can offer shares to the public and is listed on stock exchanges. It has stringent regulatory requirements and allows for broad capital-raising opportunities through public investors.
- Private limited company: Owned by a small group of shareholders, a private limited company does not trade shares publicly. It offers limited liability protection and is easier to manage than public companies, with fewer compliance obligations.
- Limited liability partnership (LLP): A limited liability partnership combines the benefits of a partnership and a company, providing limited liability to partners while allowing them to manage the business directly. It is ideal for professional services firms.
- Sole proprietorship: The simplest business form, sole proprietorship, owned and managed by one individual. It offers complete control but comes with unlimited personal liability for business debts.
- Private company: A private company in India is a business with a minimum of two members and a maximum of 200. Its shares are not available to the general public. It is formed under the Companies Act, 2013
- General partnership: A general partnership involves two or more individuals who share ownership and responsibility for the business. The partners share both profits and liabilities equally unless agreed otherwise
- One Person Company (OPC): A One Person Company is a type of private company where a single individual is the sole owner and operator. It offers the benefits of a private company with limited liability but with just one member
- Corporation: A corporation is a legal entity separate from its owners. In India, this would typically refer to large public or private companies formed under the Companies Act, 2013
- Limited Liability Company (LLC): In India, a Limited Liability Company, usually a private limited company, offers protection to its shareholders. Shareholders are not personally responsible for the company’s debts beyond their shareholding
- Nonprofit: A nonprofit organisation in India is set up to serve public interest, rather than to generate profit. It is typically registered under the Societies Registration Act or as a Section 8 company under the Companies Act, 2013
- Subsidiary: A subsidiary is a company that is controlled by another company, called the parent company. The parent owns the majority of the subsidiary’s shares
- Unlimited company: An unlimited company in India is one where the liability of members is not limited. In the case of debt, the members may be personally responsible for the company's obligations
- Holding company: A holding company is a parent company that owns enough voting stock in another company to control its policies and decisions, though it may not necessarily operate the subsidiary
- Foreign corporation: A foreign corporation in India refers to a company that is incorporated outside of India but does business within India. It operates under the rules of the Foreign Exchange Management Act (FEMA)
- Associate companies: An associate company is a company where another company holds a significant amount of shares (between 20-50%) but does not have full control
- Charitable companies: Charitable companies in India are set up to promote charitable activities and are typically registered under Section 8 of the Companies Act, 2013. They are non-profit and exempt from taxes
- Cooperative: A cooperative in India is a business organisation owned and operated by its members who share the profits or benefits. It is often set up to promote the welfare of its members, such as in agriculture or housing
- S corporation: In India, there is no direct equivalent to an S Corporation as in the USA. However, small businesses with limited liability can enjoy tax benefits similar to an S Corporation if they meet certain criteria
- Community Interest Companies: A Community Interest Company (CIC) in India is a non-profit company that aims to benefit the community rather than making profits for its members. This model is mostly used for social enterprises
- Public company: A public company in India is a company that has more than 7 shareholders, and its shares are available to the public. It is listed on the stock exchange and governed by the Securities and Exchange Board of India (SEBI)
- Section 8 company: A Section 8 company in India is a non-profit organisation formed to promote charitable purposes such as education, art, science, religion, or social welfare. It enjoys tax exemptions under the Income Tax Act
- Listed company: A listed company in India is one that is officially listed on a stock exchange like the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE). Its shares are publicly traded
- Government company: A government company in India is a company in which at least 51% of the shares are owned by the government, either central or state. It operates like any other company but with the government as the majority shareholder
Classification of different types of companies
Classification by liability of members:
- Company limited by shares: Members are responsible only for the unpaid amount on their shares.
- Company limited by guarantee: Members’ liability is limited to the amount they have promised to pay if the company is closed.
- Company with unlimited liability: Members are personally responsible for all the company’s debts.
Classification by number of members:
- Private company: Has a small number of members (less than 200), is closely held, and does not allow public shareholding.
- Public company: Has many members, can raise money from the public, and its shares can be listed on stock exchanges.
Classification by mode of incorporation:
- Statutory company: Created by a special law passed by Parliament or state government.
- Registered company: Formed under the Companies Act.
- Chartered company: Created long ago by royal charter (mostly historical now).
Other important classifications:
- OnePerson Company (OPC): A private company with just one member.
- Government company: Mostly owned by the government.
- Holding company: Owns and controls one or more other companies.
- Foreign company: Incorporated outside India but doing business in India.
- Section 8 company: Set up for social or charitable purposes and does not pay dividends to members.
What are micro, small and medium companies in India?
A company or enterprise may qualify as an MSME under the MSME Act based on investment and annual turnover. The revised classification effective from 1 April 2025 divides MSMEs into 3 size categories.
| Company type | Investment limit | Turnover limit | Best for |
|---|
| Micro | Up to Rs. 2.5 crore | Up to Rs. 10 crore | Home-based and early-stage businesses |
| Small | Up to Rs. 25 crore | Up to Rs. 100 crore | Growing regional businesses |
| Medium | Up to Rs. 125 crore | Up to Rs. 500 crore | Established businesses scaling nationally |
Eligible businesses may consider a Bajaj Finance micro loan or MSME loan, depending on their funding needs and eligibility.
Different companies on the basis of members
Companies can be classified based on the number of members involved in their ownership and management. One Person Companies (OPCs) are owned and operated by a single individual, combining the simplicity of sole proprietorship with the benefits of limited liability. Private companies consist of a small group of members, usually family or close associates, and restrict the transfer of shares to maintain control and privacy. Public companies, on the other hand, have a large number of members and offer shares to the general public, allowing for wider ownership and access to capital markets. Each type serves different business needs and scales of operation.
a) One Person Companies (OPCs)
These companies consist of a single individual as the sole shareholder. Unlike sole proprietorships, OPCs are considered separate legal entities, distinct from their single member. Additionally, OPCs do not require any minimum share capital.
b) Private Companies
Private companies have restrictions in their articles of association that prevent the free transfer of shares. They must have between 2 and 200 members, including current and former employees who own shares.
c) Public Companies
Public companies differ from private companies by allowing members to freely transfer their shares to others. They require at least 7 members, with no upper limit on the number of members.
Different companies on the basis of liabilities
When considering the liabilities of members, companies can be classified as limited by shares, limited by guarantee, or unlimited.
a) Companies limited by shares
In some cases, shareholders may not pay the entire value of their shares at once. In such companies, the liabilities of members are limited to the amount unpaid on their shares. This means that if the company is wound up, members will be liable only for the unpaid portion of their shares.
b) Companies limited by guarantee
Some companies have a memorandum of association that specifies the amounts members guarantee to pay. If the company is wound up, members will only be liable for the amount they guaranteed. The company or its creditors cannot compel members to pay more than this amount.
c) Unlimited companies
In unlimited companies, there are no limits on the members' liabilities. In the event of debts, the company can use all personal assets of shareholders to meet its obligations. The liabilities will extend to the company’s entire debt.
Different companies on the basis of control or holding
When discussing control, companies can generally be classified into two types:
a) Holding and Subsidiary Companies
In some situations, a company’s shares may be fully or partially owned by another company. The company that owns these shares is referred to as the holding or parent company, while the company whose shares are owned by the parent is called the subsidiary.
Holding companies exert control over their subsidiaries primarily by determining the composition of their board of directors. Additionally, a parent company often holds more than 50% of the shares in its subsidiary, further solidifying its control.
b) Associate Companies
Associate companies are those where another company has substantial influence, typically through owning at least 20% of the shares. This influence can also extend to making business decisions under specific agreements or through joint venture arrangements.
Different types of companies based on listing
Companies are categorised into listed and unlisted based on their access to capital. While all listed companies must be public, the reverse is not necessarily true, as an unlisted company can be either private or public.
Listed Company
A listed company is one that is registered on recognised stock exchanges, either within or outside India. Shares of listed companies are traded freely on these exchanges and are subject to regulations set by the Securities and Exchange Board of India (SEBI). To list its shares, a company must issue a prospectus inviting the public to subscribe to its debentures or shares. This process can be done through an Initial Public Offering (IPO), and an already listed company may further raise capital through a Follow-on Public Offering (FPO).
Unlisted Company
An unlisted company is not registered on any stock exchange, meaning its shares are not available for public trading. These companies typically raise capital through funds from friends, family, relatives, financial institutions, or private placements. If an unlisted company wishes to become publicly traded, it must convert to a public company and issue a prospectus to list its securities on the stock exchanges.
Advantages of a Company
Companies offer multiple structural and financial benefits that support long-term growth and investor confidence:
- Limited liability protection: Shareholders are only liable for the unpaid amount on their shares, shielding personal assets from business liabilities.
- Stable business continuity: Companies continue to operate despite changes in ownership, ensuring long-term stability and uninterrupted operations.
- Efficient management structure: Decisions are made by a designated board or management team, enabling strategic alignment and professional governance.
- Ownership transfer flexibility: Company shares can be transferred or sold without disrupting day-to-day operations, ensuring smooth ownership transitions.
- Enhanced fundraising ability: Companies can issue shares or borrow funds, giving them broader access to capital for growth and expansion.
- Favourable tax provisions: Many jurisdictions offer tax incentives or deductions, improving the company’s financial efficiency and shareholder returns.
- Increasedbrand credibility: Strong brand identity helps attract customer loyalty, market recognition, and competitive advantage over time.
Disadvantages of a Company
Despite its strengths, the company structure comes with legal and operational complexities that require careful navigation:
- Heavy compliance burden: Companies must follow strict statutory requirements such as regular filings, disclosures, and governance norms.
- Double taxation issue: Corporate income is taxed at the company level, and dividends are again taxed in the hands of shareholders.
- Reduced owner involvement: Centralised management limits the direct participation of owners in daily decision-making, reducing flexibility.
- Bureaucratic decision process: Layers of approval and structured management can slow down responsiveness, especially in dynamic environments.
- Public disclosure pressure: Listed companies face constant scrutiny from regulators, investors, and media, affecting decision-making freedom.
Check your pre-approved business loan offer to get started with funding that matches your business goals without delay.
Company vs. corporation
Within the Indian business ecosystem, the terms Company and Corporation are often used interchangeably, yet they carry distinct legal and structural implications under the Companies Act, 2013.
Key differences: company vs corporation
| Aspect | Company | Corporation |
| Legal definition | A broad term for a business entity formed to conduct trade or commerce. | A specific legal entity, often a large-scale company or a statutory body. |
| Ownership structure | Can vary from a single owner (OPC) to multiple partners or shareholders. | Primarily owned by shareholders through the issuance of capital stock. |
| Regulatory framework | Compliance depends on the specific type (Private, Public, or Section 8). | Typically highly regulated with stringent disclosure norms for the ROC. |
| Examples | Local SMEs, private limited firms, and partnership-based ventures. | Large multinational entities, Public Sector Undertakings (PSUs), or banks. |
Public vs. private companies
Choosing between a public limited company and a private limited company is a defining decision for any Indian enterprise. While both are governed by the Companies Act, 2013, their operational scales and compliance burdens under the Ministry of Corporate Affairs (MCA) differ significantly.
Public company vs private company: key differences
| Feature | Public company | Private company |
| Ownership structure | Owned by public investors; must have at least seven members. | Owned by private shareholders; limited to a maximum of 200 members. |
| Capital raising | Can raise funds from the general public via the stock market (IPO). | Restricted to private funding, such as angel investors or promoters. |
| Regulatory framework | Strict compliance; subject to SEBI norms and rigorous quarterly disclosures. | Moderate compliance; enjoys several exemptions from the ROC. |
| Share transferability | Shares are freely tradable on a recognised stock exchange. | Shares are not freely transferable; subject to the Articles of Association (AoA). |
What documents are required to register a company in India?
The documents required to register a company through the MCA SPICe+ portal generally include 7 core identity, address, constitutional and digital filing records.
| Document | Purpose | Format | Accepted types |
|---|
| PAN card of directors | Identity proof for MCA filing | Self-attested copy | Valid PAN |
| Aadhaar card | Identity and address verification | Self-attested copy | Valid Aadhaar |
| Residential address proof | Confirms each director’s address | Copy not older than 2 months | Utility bill or bank statement |
| Registered office proof | Confirms the company’s official address | Signed or notarised copy, as applicable | NOC, rent agreement and utility bill |
| Memorandum of Association | Defines the company’s objectives | Electronic MoA or prescribed format | Drafted with professional assistance where required |
| Articles of Association | Sets internal governance rules | Electronic AoA or prescribed format | Drafted with professional assistance where required |
| Digital Signature Certificate | Enables online SPICe+ filing | Class 3 DSC | Issued by an authorised certifying authority |
MCA approval may take 7–10 working days after submitting correct documents. When exploring how to start company operations, note that Bajaj Finance business loan applicants must meet applicable business-vintage and eligibility requirements.
How to start a company in India: step-by-step guide
Understanding how to start company registration in India involves 7 steps, completed online through the MCA’s SPICe+ portal.
- Choose the structure: Decide between a Private Limited Company, OPC or Public Limited Company. An LLP follows the separate FiLLiP process.
- Obtain DSCs: Secure a Class 3 Digital Signature Certificate for every proposed subscriber and director signing the forms.
- Apply for DIN: Request Director Identification Numbers through SPICe+ for directors who do not already have one.
- Reserve the name: Submit the proposed company name through SPICe+ Part A.
- File incorporation forms: Complete SPICe+ Part B with the MoA, AoA and supporting records.
- Receive incorporation approval: The ROC issues the Certificate of Incorporation with the CIN, PAN and TAN.
- Open a bank account: Use the COI and company records to activate the business account.
Total time is usually 7–15 working days for a straightforward application.
Example
Priya, a Jaipur-based apparel entrepreneur, selects a private limited structure, completes the MCA filings and receives her COI in 10 working days.
Once applicable eligibility requirements are met, check your Bajaj Finance business loan offer for growth funding.
How much does it cost to register a company in India?
When planning how to start company registration, expect a typical cost of Rs. 6,000–Rs. 30,000, depending on the company type, state stamp duty, authorised capital and professional fees. MCA incorporation is completed through SPICe+, with DSC and DIN requirements forming part of the process.
| Cost item | Typical range | Notes |
|---|
| Digital Signature Certificate | Rs. 1,000–Rs. 2,000 | Class 3 DSC; charged per applicant |
| Director Identification Number | Rs. 0–Rs. 500 | Usually allotted through SPICe+; Rs. 500 may apply to separate DIR-3 filing |
| MCA government fee | Rs. 1,000–Rs. 5,000 | Varies with authorised capital and applicable filings |
| Professional, CS or legal fee | Rs. 3,000–Rs. 20,000 | Depends on the provider and scope |
| MoA and AoA drafting | Rs. 1,000–Rs. 3,000 | May be included in the professional fee |
| Total typical cost | Rs. 6,000–Rs. 30,000 | Public companies and complex filings may cost more |
Eligible established businesses may consider a Bajaj Finance business loan for approved registration, setup and expansion expenses.
Advantages and disadvantages of starting a company
The advantages of starting a company are:
- Control: Full control over business decisions and direction.
- Profit: Potential to earn substantial profits.
- Growth: Opportunity to scale and grow the business.
- Creativity: Freedom to innovate and implement new ideas.
- Legacy: Building a legacy and creating long-term value.
The disadvantages of starting a company are:
- Risk: High financial risk and potential for business failure.
- Workload: Significant time and effort required.
- Liability: Personal liability for business debts, unless incorporated.
- Funding: Difficulty in securing initial funding or a business loan.
- Uncertainty: Market competition and economic instability.
Why choose a Bajaj Finance business loan to fund your company?
Once you understand how to start company operations and your registered business meets the applicable vintage and eligibility requirements, a Bajaj Finance business loan can provide up to Rs. 80 lakh for business expenses.
- Disbursement: The approved loan amount may reach your bank account within 48 hours in most cases, subject to verification and documentation.
- Loan amount: Eligible businesses can borrow between Rs. 2 lakh and Rs. 80 lakh based on their funding needs and credit assessment.
- Interest rate: Rates range from 14% to 23.50% p.a., depending on the applicant’s profile and applicable terms.
- Repayment tenure: Choose a tenure from 12 to 96 months based on your cash flow and repayment capacity.
You can even check your Bajaj Finance business loan offer using your mobile number and OTP.
Helpful resources and tips for business loan borrowers
