Difference Between Company and Body Corporate

In corporate law terms like company and body corporate are often used interchangeably, leading to confusion. While they share similarities, these terms have distinct meanings and legal implications. The difference is essential for entrepreneurs, business owners, and legal professionals involved in company registration, governance, and compliance.

What is a Company?

A company is a legal entity formed and registered under the Companies Act, 2013 in India (or similar legislation in other countries). It has a distinct legal identity separate from its owners and is capable of owning assets, entering into contracts, suing, and being sued in its own name. Companies can be of various types, including:

• Private Limited Company

• Public Limited Company

• One Person Company (OPC)

• Section 8 Company (non-profit organizations)

• Subsidiary Company (owned by another parent company)

The primary goal of a company is to conduct business activities, generate profits, or, in the case of Section 8 companies, pursue charitable objectives.

What is a Body Corporate?

A body corporate is a broader term that refers to any legal entity that has been incorporated under a specific law. This includes companies but also extends to other entities like limited liability partnerships (LLPs), cooperative societies, municipal corporations, and even foreign companies.

In simpler terms, while every company is a body corporate, not every body corporate is a company. A body corporate is recognized as an entity that has perpetual succession, can own property, and is capable of suing and being sued in its own name.

Key Differences Between Company and Body Corporate

Legal Framework Governing Companies and Bodies Corporate

1. Companies Act, 2013

The Companies Act, 2013 governs the incorporation, management, and dissolution of companies in India. It defines a company as a legal entity with limited liability, separate from its owners. Companies must adhere to strict compliance requirements, such as annual filings, audits, and board meetings.

2. Limited Liability Partnership (LLP) Act, 2008

LLPs, while considered bodies corporate, are governed by the LLP Act, 2008. They combine features of partnerships and companies, offering limited liability to partners while providing operational flexibility.

3. Cooperative Societies Act

Cooperative societies are bodies corporate registered under the Cooperative Societies Act. They operate based on mutual benefit principles and are often formed for agricultural, housing, or credit purposes.

4. Municipal Corporations and Other Entities

Municipal corporations, statutory bodies, and even foreign companies operating in India are classified as bodies corporate. Their governance is dictated by specific laws applicable to their functions.

Types of Companies Under the Companies Act

1. Private Limited Company: Requires a minimum of two members and offers limited liability to its shareholders. It is one of the most common business structures in India due to its flexibility and investor-friendly features.

2. Public Limited Company: Can offer shares to the public and is subject to stricter compliance requirements. Ideal for larger businesses seeking to raise capital through public offerings.

3. One Person Company (OPC): Allows a single individual to own and operate a company with limited liability protection. OPC registration is ideal for solo entrepreneurs.

4. Section 8 Company: A non-profit organization formed for charitable, social, or educational purposes. It enjoys tax benefits and is subject to specific compliance requirements.

5. Subsidiary Company: A company controlled by another parent company. It can be domestic or foreign, depending on the ownership structure.

Types of Bodies Corporate Beyond Companies

1. Limited Liability Partnership (LLP): An LLP offers the flexibility of a partnership with the limited liability benefits of a company. It is a popular structure for professional services and small businesses.

2. Cooperative Societies: Formed to promote the interests of members, cooperative societies are common in sectors like agriculture, housing, and finance.

3. Statutory Bodies: Entities like municipal corporations or public sector undertakings (PSUs) are established by special statutes and perform public functions.

4. Foreign Companies: Companies incorporated outside India but operating within Indian jurisdiction are considered bodies corporate under Indian law.

Compliance and Legal Obligations

For Companies:

• Company Registration:

  Mandatory under the Companies Act. Online company registration has simplified the process.

• GST Registration:

  Required if turnover exceeds Rs. 20 lakhs (Rs. 10 lakhs in special category states) or if the company engages in interstate trade.

• AD Code Registration:

  Essential for companies involved in import/export activities. Registration is done on the ICEGATE portal for customs clearance.

• Annual Filings:

  Companies must file annual returns, financial statements, and hold regular board meetings.

• GST Cancellation:

  If the business ceases operations or falls below the GST threshold, GST cancellation is required.

For Other Bodies Corporate:

• Registration Under Relevant Law:

  LLPs, cooperative societies, and other entities must register under their respective governing acts.

• Compliance Requirements:

  Compliance varies based on the entity type. LLPs, for instance, have different filing requirements compared to companies.

• Tax Obligations:

  All bodies corporate must adhere to tax laws, though the specifics vary depending on the structure.

Advantages of Choosing a Company Structure

1. Limited Liability: Shareholders’ personal assets are protected from business liabilities.

2. Separate Legal Identity: A company can own property, enter contracts, and sue or be sued by its own name.

3. Perpetual Succession: A company continues to exist despite changes in ownership or management.

4. Ease of Raising Funds: Companies can attract investments through equity shares, venture capital, or public offerings.

Advantages of Choosing Other Bodies Corporate

1. Operational Flexibility: Entities like LLPs offer greater operational flexibility compared to companies.

2. Lower Compliance Costs: LLPs and cooperative societies have fewer compliance requirements than companies.

3. Sector-Specific Benefits: Cooperative societies and statutory bodies often enjoy sector-specific advantages, such as government grants or tax exemptions.

Conclusion

While the terms company and body corporate are often used interchangeably, they have distinct legal meanings. A company is a specific type of body corporate registered under the Companies Act, while a body corporate encompasses a wider range of legal entities, including LLPs, cooperative societies, and statutory bodies. The differences are crucial for entrepreneurs, legal professionals, and anyone involved in corporate governance or company registration.

FAQs

Q1. Is every company a body corporate?

Ans. Yes, every company is a body corporate, but not all bodies corporate are companies.

Q2. What is the main difference between a company and a body corporate?

Ans. A company is a specific type of body corporate registered under the Companies Act, while a body corporate is a broader term that includes companies, LLPs, cooperative societies, and other legal entities.

Q3. Do both companies and bodies corporate need GST registration?

Ans. Yes, if they meet the turnover threshold or engage in interstate trade, both companies and bodies corporate need GST registration.

Q4. Can a body corporate be a non-profit entity?

Ans. Yes, entities like Section 8 companies and certain cooperative societies are non-profit bodies corporate.

Q5. Do all bodies corporate need AD code registration?

Ans. Only bodies corporate involved in import/export activities need AD code registration on ICEGATE.

Q6. Can an OPC be considered a body corporate?

Ans. Yes, an OPC (One Person Company) is a body corporate registered under the Companies Act.