Advantages & Disadvantages Of One Person Company

advantages & disadvantages of OPC

One Person Company is a company that is registered and owned by a single person only. Under the companies act, 2013 the government has introduced the new version of the company which is suitable for the persons who wants to run their business solely, it is basically an updated version of sole proprietorship the main difference between these two entities is that the OPC is registered with the Ministry of Corporate Affairs and sole proprietorship is not governed or regulated under any law. OPC is a type of private limited company with a single person, the company cannot have more than one shareholder during its life. For adding new members by issuing shares the company first have to convert itself from OPC into either a private limited or public limited company. The company also enjoy all the benefits of a private limited company except it cannot run their business activity in the financial sector and banking sector as well as cannot operate its function like NBFC. There are many advantages which the company enjoys like limited liability, has a separate legal entity, can own or sell any property including intellectual property like trademark, copyright, etc., can have a maximum of 15 directors on its board, also can get financial support from the banks or institution easier than sole proprietorship. After getting registered the company has to do all the annual compliances which are applicable on the OPC within the specified time limit to avoid penalties.

Advantages Of One Person Company

  • A single person can start a one person company under the name of OPC Pvt Ltd.
  • There is no minimum capital requirement to start the company
  • The company has a separate legal entity and due to that the company can own, rent, buy, deal in the properties in their name. 
  • Due to single person ownership, there is no profit-sharing option
  • The liability of the shareholders is limited
  • No need to conduct general meetings including the annual general meeting because there is only one shareholder in the company
  • The company needs to conduct 2 board meetings in a calendar year and the gap between the two board meetings shall not be less than 90 days
  • The compliances are less in comparison to a public limited company
  • As it is a type of private limited it gets easy financial support from the banks and institutions in comparison to the sole proprietorship.

Disadvantages Of One Person Company

  • The company cannot issue shares to any person other than its member
  • There is no exemption granted to OPC companies under the Income-tax act. There is a flat 25% tax rate applicable on the company
  • OPC is basically a small company but still, the OPC has to do all the annual compliances every year within a given time limit whether the company is holding an annual general meeting or not, if OPC fails to do the annual compliances then there will be a penalty on OPC company
  • OPC cannot convert itself from section-8 company
  • If the paid-up capital of the company exceeds 50 lakh rupees and turnover exceeds 2 crore rupees in any financial year then the company has to convert itself into either a private limited company or a public limited company mandatorily.
  • OPC cannot have its business activity which is related to finance, bank neither it can operate its function like NBFC
  • A company cannot issue ESOS or ESOP to its employees, before issuance of any shares the company has to convert itself into any other company
  • The member has to appoint its nominee during the life of the company and the nominee can be only a natural person. 

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