Types of Business Entities In India


In Simplest terms,  we can say a business entity is an organization is created by one or more people that the entity is formed and administered as per corporate law i.e. The Companies Act, 2013. The entity is usually conducting business, engage in trade, charitable work, or other activities are allowable while mostly the business entities are formed to sell product or service. The most crucial thing when the entity starts a business the individuals should make sure that is to choose a type of business entity in India. This decision enhances legal financial implications, owner liability and compliance burden for business. The taxes should be pay depends upon business entity choice.

Around the world there are there types of business entities which are Sole proprietorship, partnership, corporation Since India is a land of diversity it constituting a mixed economy so there are numerous types of business entities however most business owners choose the most common types of business such as Sole proprietorship, Partnership firm, one person company, Joint venture company, One person company and non-governmental organizations. In India every business must register with proper government authorities to comply with laws of nation the entities of registration and winding up proceedings all of them mentioned under Companies Act, 2013 and also the registration is based upon the structure of the company. In the business, entity concept states that transactions are associated with a business must be separately recorded those of its owners and other business. If the business segments in various forms that it would measure separately.

This paper aims on seven types of entities which are mentioned under above and it would be recognized under the Indian law. Therefore types of entities are described in detail below.



Under this entity is established in India a single person is an owner and it consists of only one worker of the whole enterprise i.e. single person runs the entire business organizations. This type of enterprise does not fall under company law therefore any needs to registration but they might to get local business licenses or get permits it depends up the industry. He is the only bearer of all profit and loss in the entity. The main drawback of the entity does not grow vast development; it only attains a certain limit due to limited labor and capital.


A private limited company is considered a separate legal entity and it consist of limited number of shares held by that member. It has minimum of one and maximum of fifty shareholders. In this type of entity the shareholders and directors are the employee of the company. This entity has to maintain records of all transactions and accounts[1]. There is tax exemption for first three years of the business establishment this enhances the company’s growth. There should be filed a business tax returns each year along with company returns must also be filed.


The Companies Act, 1956 constitute the provision public limited Company which is a voluntary association of members having a limited liability and offers a share to be general in public. The shares are offered to the general public at large anyone can invest in a public limited company that results in improving the capital in the company. Such companies have minimum members, but there is no upper limit to the number of members. The main drawback of entity the control of board of director has to get vast power in decision making, the shareholders don’t have right even they didn’t allow to involve the day to day activities


In previous the single person could not incorporate a company but after, The Companies Act, 2013 introduced a new concept one person Company this type of entity which is owned by single person it’s similar to private limited company. It allows sole person to own and manage the entire business operations. To register the one person company in India must be a natural person and no other artificial body.


This type of entity two or more persons can carry on lawful business but the number of business should not exceed 10 in case of banking business and 20 in case of other business. Partnership does not have separate legal entity. Each partners has to contribute the shares equally and also both profit and loses occurs equally divided among all the partners. In case of any debts occur on the part of any partner each partner is liable and contributes equally.


A business arrangement is entity which created by two or more parties for the purpose of accomplishing a task. The entities can be joining only for the purpose of a new project or any other business activity. In joint ventures, each of the participants is responsible for profit and loses. This type of entity is only for a temporary arrangement between your company and another entity once the target is achieved the entity might be split up.[2]


This entity is new form of business. The partners are free from liability and it has flexibility in ownership. The maximum liability of each partner is limited to extent of investment in the firm. The company is to be incorporated through ministry of corporate affairs. This entity must have at least members at least one should be resident of India. There is a duty to maintain annual accounts which shall be regularly audited.


This is citizen based association that operates independently of the government usually serves some purpose. This organization does not intend towards gaining profit and work for promoting to attain social service for e.g. providing care of children, education, disabled person etc.


Especially India has too many entities to run business therefore easily carrying a business through international level. Selecting a business entity is a complex decision for the long term effects of the ownership, owner liability and taxation of business. Once we have an idea to start business entity and evaluated your business ownership can ask the advice from financial professionals to choose the best business entity. Before starting a new entity the individuals can seek opinion from business lawyer or accountant about business entity. The most important thing in forming a business entity is to protect the personal assets and liabilities when the event that there is lawsuit or judgment against your business


  1. https://lexquest.in/business-entities-india-explained/.
  2. https://www.company-registration.in/business-entities-in-india.php.
  3. https://www.toppr.com/guides/business-studies/forms-of-business-organisations/introduction-and-evaluation-to-forms-of-business-organisations/.
  4. https://www.fundera.com/blog/business-entity#overview.
  5. https://nnroad.com/blog/company-formation/types-of-business-entities-in-india/

This Article Written By Shantha Roopini. B, Student Of The Tamilnadu Dr.Ambedkar Law University.

Also Read – Rights and Liabilities of Partners in a Partnership Firm

Law Corner

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