There is no legal requirement to keep the books and records in a particular manner. However, proper books and records have to be maintained for income tax purposes. The law relating to companies in India is contained in the Companies Act, 1956. The Act permits the incorporation of both public and private companies, with or without limited liability. Private' and 'public' companies limited by share capital are the more popular forms of business organisation in India.
Companies limited by guarantee or unlimited companies, though permissible, are relatively uncommon.
A firm which does not contain such restrictive provisions in its organisational document is a public company. When the intention is to not mobilise funds from the public, then a private firm is a better-suited form of organisation as private companies are less regulated than public companies. Provisions of the Act are more stringent in the case of latter. The formation of a private company requires only a minimum of two members, whereas in the case of a public company, a minimum of seven members are required. A private company can commence business immediately upon receipt of the certificate of incorporation, while a public company is required to comply with certain other conditions prescribed in the Act before it can obtain a certificate authorising it to commence business.