10 Reasons why start-ups should choose One Person Company

  • September 09, 2022
  • Registrationwala
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With innovation and IT, boom in the country more and more people are taking up entrepreneurship and starting their own business. However, one of the most important questions for a new entrepreneur is to find out which sort of company he should float in the contemporary scenario. Going by the recent trend and business environment, the best advice one can give a nascent entrepreneur is to opt for OPC (One Person Company). There are various benefits of OPC. Some of them are listed below. Have a read:

A separate entity for law

One of the major benefits of opting for an OPC is that according to law a separate legal entity is created. And it means that the company will be legally equipped to do almost everything a person is allowed to do in a legal set-up.

  1. Smooth funding: Getting funding is relatively easier for an OPC. It can manage to fund from financial institutions, angel investors, etc. Thus an OPC, gradually over the course of time, can even turn itself into a Pvt Ltd company.
  2. Limited liability: Every start-up dreams of being as little risk-prone as possible. Hence it is always on a lookout for limited liability. OPC promotes its owner to go an extra mile without having to care for the liabilities it may incur in case of failure. In the case of OPC, even if the company falters, liability will only affect the capital of the company and not disturb the personal assets of the owner.
  3. Minimum regulations, maximum results: Since in OPC is under the control of one person, there are various regulations which are eased for it. Thus a new entrepreneur can always be more focused on his business rather than losing his sleep over the never-ending list of regulations and laws for starting a new business in a growing economy like India.
  4. Perks of a Small Scale Industries (SSI): The government is always willing to promote small scale industries and has often gone extra yards to see that the everyday furnishing small scale industries grow at a decent pace. After all, SSIs form the backbone of an agrarian economy like India. An OPC falls under the category of an SSI thus it can avail all those benefits which are there for SSI units. Some of those perks include loans at lower interest rates, funds without any security from banks up to a certain limit, benefits under FTP (Foreign Trade Policy). Once a company gets these earlier benefits it goes a long way in providing it the much sought early boost.
  5. The Sole owner: Being the sole owner of the company gives you full control over the business. While it also puts your leadership and entrepreneurship skills attest, it ensures that the decision making is quicker. Also in OPC whatever the results are you are going to be responsible for it. It makes sure that the credit for the company's growth goes to the sole owner.
  6. Free from the hassle of a credit limit: When an OPC file for a loan, the credit limit of the owner does not affect that. To put things in simpler words, even if the credit limit of the owner is not that great, his OPC will be able to generate good funds.
  7. Favorable Income Tax Laws: Once the company is registered as an OPC, any money being spent on the salary of the director will be allowed as a tax deduction. There are certain other benefits available too which are subject to the income tax act.
  8. Interest on late payment: Since almost all the start-ups fall in the category of SSI, they receive protection under Small and Medium Enterprises Development act 2006. If a buyer of the service fails to pay for it under a certain period as specified by the seller, the seller is free to charge interest on his product.
  9. No trust deficit: If there's a business which runs in the name of a company, naturally people have more faith in it.

Also before we wind up, here is another note: Any existing business can convert it as OPC and thus avail all the aforementioned benefits.

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