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Types of Business in India – Know About All Entities

types of business in india

Are you planning to start your own business or already working in an organization? No matter what stage you are in, it is essential to know the types of business structures in India. It helps you understand the legal aspects of each of these business models, which enables you to make an informed decision before registering your own company.

In this article, we have covered different types of business models available in India. Have a look at each of these business models below.

Types of Business in India

Sole Proprietorship

A sole Proprietorship is a business model that only one person controls. If you are alone and planning to start a small-scale business, then it is suggested to go with this option. There is no formal registration needed for Sole Proprietorship.

Though the registration process for this business model is easy, the owner has to bear all the liabilities in case of loss. Also, the entire profit made by the owner has to be shown in his personal income tax.

Advantages of Sole Proprietorship

  • Low startup cost
  • Easy Decision Making
  • Profits belong to the business owner

Disadvantages of Sole Proprietorship

  • Unlimited Liability
  • Cannot attract more funds
  • Difficult to scale


Unlike Proprietorship, in the Partnership business entity, two or more people can enter the agreement, manage the business, and share the profits. The partnership deed defines the amount of capital each owner invested, and the share of profits each can take.

In this business entity, the partners are responsible for all the liabilities. There is no limit to the liabilities the partners have to bear. It is why most business people do not try to go with partnership registration.

Here are a few advantages the Partnership business model offers: 

  • It is easy to setup
  • The setup cost is low
  • The work is divided among the partners
  • Ability to raise more funds
  • An audit is not necessary

Disadvantages of Partnership

  • There is unlimited liability
  • The business has no separate existence
  • No complete control over the business

Limited Liability Partnership

This business model is incorporated under the Limited Liability Partnership Act of 2009. Unlike the Partnership firm, in a Limited Liability Partnership, the partners are not responsible for unlimited liabilities. The debts are only limited to the investments made by each of the partners.

Advantages of Limited Liability Partnership

  • There is no minimum capital required for starting a Limited Liability Partnership
  • Compared to a Private Limited Company, this business model requires fewer agreements
  • It has a limited liability
  • There are many tax advantages
  • There is no audit required

Disadvantages of Limited Liability Partnership

  • Decision-making is not in the hands of one person
  • It isn’t easy to scale

Private Limited Company

A Private Limited Company requires minimum paid-up capital and restricts the right to transfer shares among the partners. The maximum number of shareholders a Private Limited Company can have is 200. As per the Companies Act of 2013, a Private Limited Company is a separate legal entity. So, the shareholders are not liable when the business incurs a loss. Moreover, Private Limited Companies have an easy exit.

Advantages of Private Limited Company

  • It has a limited liability
  • It is more credible compared to a General Partnership company and a Limited Liability Partnership
  • It acts as a separate legal entity
  • It is scalable

Disadvantages of Private Limited Company

  • There are limited members
  • The company cannot offer shares publicly
  • The shareholder restricts the right to transfer shares

One Person Company

As per the Companies Act of 2013, One Person Company is a company with only one person as a member. It is recently invented to help business persons own and manage their companies alone.

Advantages of One-Person Company

  • It is easy to form One Person Company
  • The owner has complete control over the company
  • Easy decision making

Disadvantages of One-Person Company

  • It has a higher startup cost
  • Statutory Audit is necessary

Public Limited Company

As per the Companies Act, Section 2(71), any company which is not a private company is considered a Public Limited Company. This business entity requires at least seven members with minimum paid-up capital for the company formation.

The shares of a Public Limited Company are open to the public. However, a Public Limited Company has more legal restrictions than a Private Limited Company.

Advantages of Public Limited Company

  • The liability of the stakeholders is limited. The personal properties of stakeholders are not at risk.
  • There is no limit on the maximum number of shareholders
  • The company operates irrespective of the presence of a shareholder
  • The company can raise funds through the stock market in the form of bonds and debentures

Disadvantages of Public Limited Company

  • Shareholders do not have complete control over the company
  • There are many rules and regulations to be followed

Section 8 Company

Section 8 Company is also called a non-profit organization. You can register this kind of company under the Companies Act of 2013. The Section 8 company has all types of eligibility, like a Private Limited Company, without any need to add “Private Limited” at the end of the company name.

The company’s profits will only be used to promote its objects like art, commerce, science, charity, etc. You will not share the profits made by the company with any of its members.

Advantages of Section 8 Company

  • The company need not pay any stamp duty
  • Access to various tax benefits as per the Income Tax Act
  • You can set up the company without any minimum share capital

Disadvantages of Section 8 Company

  • You will not share profits made through the company with the members


Now that you know about each type of business in India, choose the one that best fits your needs. If needed, consult a lawyer or a law firm before you decide to incorporate a company. It gives you detailed information about the legalities involved in each business model.

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