Advantages of OPC
July 25, 2019
One Person Company permits a person to run a business entity with the advantage of limited liability and corporatization. OPC, a hybrid form of business entity provides some advantages which make it more popular among the economic entrepreneurs.
What is One Person Company?
THE ONE PERSON COMPANY concept is newly introduced by companies’ act 2013 to encourage self-employment with a backbone of India’s legal system. This concept enables small entrepreneurs to set up their company under single membership along with a nominee who can take over the company in case of death or any other calamity with the owner.
Examples of One Person Company
To start One Person Company one needs to have a unique name for the company. The name should be clear to indicate what the company is about. The only condition is that no company can be registered without having (OPC) Private Limited or limited at the end e.g TARGET BUILD TECH PVT. LTD. (OPC) , ASHIANA ARCHITECTS AND ENGINEERS PVT. LTD. (OPC).
Why One Person Company?
The one person company concept opens up spectacular possibilities for sole proprietors and entrepreneur who have the advantages of Limited liability and corporatisation. An OPC has many benefits over other private companies like it can avail lower Interest rate on loans, can take funds from banking institutions with depositing any security, and various other benefits under Foreign Trade policy and others.
Guidelines to operate One Person Company
1 Only a natural resident of India shall be eligible to act as a member and a nominee of an OPC.
2 Only one single member and one nominee are eligible for an OPC. The nominee cannot engulf with any other company.
3 The OPC shall have a minimum paid up capital of INR 1 Lac and an average annual turnover of Rs. 2 crores in 3 immediate preceding financial years beyond which the status of OPC is dead.
Advantages of One Person Company
1 Easily accessible: OPC registration is very easy as there is lesser documentation regarding no. of directors and a less number of Forms as it has only one member and one nominee.
2 Formation and existence: an OPC is a long lasting contract which does not cease after the death of its member rather it can be handled by its nominee.
3 Financial help: as Banking and financial institutions prefer to lend money to the company rather than proprietary firms.
4 An easy pass: after completing two years of its existence an OPC can willingly convert itself into a private or a public company limited by the rules and regulations laid by the company act 2013.
5 Limited liability: In OPC the shareholder liability is limited to his shareholding which means any loss or debt in business does not affect the personal pocket of the owner hence no personal liability against the company
How is One Person Company different from other Private Limited Companies?
Apart from having various similarities both the companies have some differences the foremost being the formation of the company, as a single member who can be both the shareholder and core director of the company can form OPC while a minimum of two directors is required to form a private limited company.
1 Ownership: The ownership of OPC is restricted to only individuals and not corporations while a private company can limit the no. of its members to two hundred hence it is helpful as the liability is limited to a single person. On the other hand in a sole proprietorship, the owner is alone liable for the claims which are made against the business
2 Succession: An OPC being an incorporated entity has the feature of perpetual succession that makes it easier for entrepreneurs to raise capital for business The nominee is thus capable to take over the business in case of the death of the owner. But in the case of private companies, the take over can only happen through the implementation of a will which can or may not be challenged in the court of law.
3 Taxation: OPC has been under many expectations as a comparison to PLC, It can make a valid contract with its shareholder or directors and can receive remuneration but OPC can be put in the same bracket of taxation as other private companies. Unlike proprietorship, the tax liability of the company and a single member is independent.
4 Meetings: for One person company annual general meeting needs to be held within in each half of a calendar year whereas in A private limited company has more procedural requirements of 4 Board Meetings, with one taking place every quarter and compulsion of not having more than 120 days between each board meeting.
The concept of one Person Company is a relief to many entrepreneurs as it helps small businesses to evolve thus helping the overall economy of the country. It is also beneficial for ones who don’t want to share their powers or duties, ones who don’t want to be bossed around as such companies get a various credit and loan facilities, easy bank operations and reduced taxes. And in the long run, these small companies can convert themselves to bigger private or public companies.