# Small Company [Section 2(85)]
## Concept
A small company is essentially a private company with limited scale of operations. The law gives small companies several relaxations (lesser compliances, reduced filings, etc.) to ease their regulatory burden.
## Twin Thresholds (BOTH must be satisfied)
A company is a small company if it is not a public company AND it meets both of the following:
| Test | Limit | Maximum Permitted by Rules |
|---|---|---|
| (i) Paid-up share capital | ≤ ₹4 crore | Up to ₹10 crore (as may be prescribed) |
| (ii) Turnover (as per P&L of immediately preceding FY) | ≤ ₹40 crore | Up to ₹100 crore (as may be prescribed) |
If even one limit is breached, the company ceases to be a small company.
## Companies EXPRESSLY EXCLUDED (cannot be small companies even if within limits)
1. A Holding company or a Subsidiary company
2. A Section 8 company (non-profit / charitable)
3. A company or body corporate governed by any special Act (e.g., LIC, RBI, SBI)
## Key Takeaways
- The thresholds are cumulative — both capital AND turnover tests must be met.
- A public company is never a small company, regardless of size.
- Turnover is tested with reference to the immediately preceding financial year's P&L.
- The status can change yearly based on financial performance.