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If you want to start a company alone, you must register your business as a One Person Company under the Companies Act, 2013. Unlike a traditional sole proprietorship, an OPC is legally recognized as a separate entity from its owner. Before the enactment of the Companies Act, 2013, a single entrepreneur had no option but to operate as a sole proprietor, which does not have a separate legal identity.
Considering the dilemma of millions of aspiring entrepreneurs, the concept of OPC was introduced. This concept was introduced through the Companies Act 2013, bringing the biggest reforms in the corporate world. It was introduced after assessing its huge success in many other leading countries like Singapore, USA, and Europe. In this blog post, we shall shed a light on the major advantages and privileges of One Person Company (OPC).
Here are the major advantages and benefits of a One Person Company in India :-
One Person Company gives legal status to the company just like a private limited company does. 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.
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 hand, OPC provides limits on the liability of a person. This means any loss or debt which is purely of a business nature will not impact the personal savings or wealth of an entrepreneur.
Unlike a private limited company, public limited companies and other companies, the requirements for incorporating an OPC are minimal. The following are the requirements for incorporating a one-person company in India :-
Minimum 1 Shareholder
Minimum 1 Director (The shareholder can also be the OPC’s 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
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. 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.
Unlike many other forms of companies, the One Person Company with more than one director 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.
The number of filings to be made with the Registrar of Companies (RoC) 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.
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 member. In the absence of the member, the working of the OPC will be handled by the nominee appointed by him.
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.
It is easier for companies to obtain loans from banks and financial institutions rather than the unorganized form of business. Most banks ask entrepreneurs to register themselves as a corporate entity to obtain loans seamlessly.
As the control of the operations of OPC lies with the single owner only the decision-making is facilitated in a speedy manner.
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.
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.
Businesses that currently run under the proprietorship model can transition to a One Person Company without any difficulty. The process is quite convenient to complete as it is an entirely online process. In this process, Form SPICe+ needs to be filed online with the MCA via the official MCA portal.
A One Person Company (OPC) is a combined package. It has the qualities of a Sole Proprietorship business and that of a Private Limited Company, thus providing a continuum with the best of both worlds. If you need professional guidance and comprehensive assistance in registering a company in India, whether it’s OPC or any other company, you can connect with our consultants at Registrationwala.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
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