Under the Companies Act, an entrepreneur can form two types of companies, namely a private company or a public company.
A Private Company is one, the articles whereof contains the following restrictions:-
- restricts the minimum paid up share capital to such an amount as may be prescribed but which shall not be less than rupees one lakh;
- restricts the rights of members to transfer its shares, if any;
- limits the number of its members to fifty excluding the past or present employees of the company who are members of the company;
- prohibits any invitation to the public to subscribe for any shares or debentures of the company;
- does not invite or accept any deposits from persons other than its members, directors or their relatives.
Also, the minimum number of members in a private company is two and such a company must have the words \'Pvt Ltd\' as the last part of its name.
A Public Company, as defined in the Companies Act, has the following features:-
- its shares are freely transferable;
- there is no ceiling on its membership;
- it can invite general public to subscribe to its shares;
- it has a minimum paid up capital of Rs.5 lakhs or such higher paid up capital as may be prescribed;
- it is a private company which is a subsidiary of a public company.
Also, the minimum number of members in a public company is seven and such a company must have the word \'Ltd\' as last part of its name.