Advantages of One Person Company Registration

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Advantages of One Person Company Registration

Do you want to start your own company alone? We are glad to inform you that now you can start your business as a One Person Company. Unlike the traditional sole proprietorship firm, OPC gives the multiple benefits of limited liability, separate legal entity, fewer requirements, and much more to the owner.

Till 31 st March 2014, any person who desires to form a legal entity was required to pool in one other member. This is because a minimum of two members were required to form a private limited company. Thus the sole person was left only with the option of proprietorship that is not a legally recognized entity. Considering the dilemma of millions of aspiring entrepreneurs the concept of One Person Company (OPC) was introduced. This concept was introduced through the Companies Act 2013, bringing the biggest reforms in the corporate world.  This concept was introduced after assessing its huge success in many other leading countries like Singapore, USA, and Europe.  Here we have listed the major benefits of OPC.

Advantages of One Person Company

Legal status

One Person Company gives legal status to the company just like a private limited company. The legal identity helps the company to build a name in the market and creates the trust of suppliers and customers.  Every large enterprise prefers to deal with the legal business structure rather than the proprietorship firms. Moreover, a corporate structure helps the company to attract a qualified and experienced workforce and retain them for a longer period of time.

Limited Liability of Directors and Shareholders

One of the major benefits of incorporating the One Person Company is limited liability. The liability of the shareholders and the members of the OPC are limited to their share only. Profit and loss both are the part and parcel of the business. Thus sometimes the company may incur heavy losses also. In such situations, it is very important for a business owner to protect his personal assets. If a person is operating under proprietorship he will be personally liable for the liabilities of the business. On the other OPC provides limits on the liability of a person this means any loss or debt which is pure of a business nature will not impact, the personal savings or wealth of an entrepreneur.

Minimal requirements

Unlike a private limited company, public limited companies, etc the minimum requirements for incorporating an OPC are very the less. The following are the requirements for incorporating a one-person company in India-   

• Minimum 1 Shareholder
• Minimum 1 Director
• The director and shareholder can be the same person
• Minimum 1 Nominee
• The minimum Share Capital shall be Rs. 1 Lac (INR One Lac)
• Letters ‘OPC’ to be suffixed with the name of OPCs to distinguish it from other companies

Easy to operate

One Person Company is comparatively a simpler form of business structure than others. Thus the compliance requirements of OPC are also very less as compared to others. Below we have mentioned some of the compliance requirements that every OPC is required to fulfill-

Annual general meeting or Extra Ordinary General Meetings is not required- As only one member is there in the OPC it is not required to conduct an AGM or EGM.  Just the resolution must be communicated by the member of the company and shall be entered in the minute book and signed and dated by the member and such date shall be deemed to be the date of the meeting.

Conducting Board Meeting- Unlike many other forms of companies, the Person Company may conduct just one meeting of the Board of Directors of the company in each half of a calendar year. The gap between the two meetings shall not be less than ninety days.

Quorum- As there is only one director in an OPC the provisions of Quorum for meetings of the Board will not be applicable.

Few filings with the registrar of companies

The number of filings to be made with the registrar of companies is very less in the case of OPC.  Further, the compulsory rotation of the auditor after the expiry of a certain term is not applicable.

Perpetual Succession

In the eyes of law, the legal identity of the OPC and its member is considered separate. Thus the life of the OPC does not come to end with the life of the ember. In the absence of the member, the working of the OPC will be handled by the nominee appointed by him.

Flexibility in taxes and savings

The OPC is empowered to make a valid contract with its members. Thus it can give remuneration to its directors, lend money to them, give them rent for their property, etc.  Some of these expenses like Directors’ remuneration, rent, and interest are allowed as deductions which as a result brings down the profits of the company, and finally, the tax liability of the company also reduces.

Ease of obtaining loans from banks

It is easier for companies to obtain loans from banks and financial institutions rather than the unorganized form of business. Most bank asks entrepreneurs to register themselves as corporate entity to obtain loan seamlessly.

Sole control

As the control of the operations of OPC lies with the single owner only the decision-making is facilitated in a speedy manner.

Creates an organized sector for proprietorship firms

In India there lies a huge unorganized market. There are around lakhs of small and medium scaled enterprises that are working in an unorganized manner.  With the introduction of OPC, a large segment of these unorganized sections is converted into an organized version of One Person Company. By bringing them under organized their liability is being made limited to their share only.

Elimination of unwanted middlemen

One-person company enabled the sole entrepreneurs to set up their businesses on their own. Thus they can directly connect with the target market and avail of other facilities without being forced to bring middlemen in between and share profits with him. 

Also read:  The Role of Mutual Fund Distributors in Investment Management

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