One Person Company (OPC)
One Person Company (OPC) is a private company having a minimum of one Director and Member whereas a public company is required to have a minimum of Three Directors and Seven members. Earlier a single person couldn’t incorporate a Company but now as per Section 2(62) of the Company’s Act 2013, a company can be formed with just one director and one member.
Advantage and Disadvantage of One Person Company (OPC)
Advantages of One Person Company
- Compliance burden: One Person Company (OPC) is a private company. However, One Person Company has a lesser compliance-related burden as compared to other private companies.
- Perpetual Succession: It is easy for entrepreneurs to raise capital for business as One person Company being an incorporated entity has perpetual succession. OPC is a separate legal entity from its proprietor.
- Simple to Get Loan from Banks: It is easy for One Person Company(OPC) to raise loans from banks and other financial institutions as they prefer to provide loans to One Person Company(OPC) instead of proprietary firms so it is favorable to register a new business as a One Person company rather than a proprietary firm.
- Annual return filing: The annual return of a company is required to be signed by a company secretary. However, In the case of One Person Company, it is not mandatory, the annual return can be signed by a director of the company.
Disadvantages of One Person Company
- High Tax Rate: As a private company, it cannot avail the benefit of the tax slabs. In the case of One Person Company income tax is charged 30% of the net profit.
- Consistency Cost: The cost of compliance of One Person Company is higher as compared to a partnership firm.
- OPC is included in Name: One Person Company(OPC) is required to specify a one-person company in its. The owner who has incorporated one person company once is not eligible to incorporate another One Person Company not as owner and not as the nominee of that other company also.
- One Person Management: The company’s success and growth are all dependent on decision-making ability. In the case of OPC, a shareholder makes all the decisions also OPC cannot invest in the shares and securities of a company which is not a part of OPC.
- OPC Incorporation is allowed: Only one OPC can be incorporated at a time. A person cannot incorporate another OPC If he wants to start a new company as an OPC.
- Not suitable for high turnover: In case of a high turnover of business the better option is to incorporate a private limited company than One Person Company. After incorporation of an OPC, it cannot be converted into a Section 8 company. However, A private limited company can be converted into a Section 8 company. After incorporating an OPC it cannot be converted to any private or public limited company until the expiry of 2 years from the date of incorporation.
