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Private Limited Company vs One Person Company

The company is a broad term, having varied structures, restrictions, rules and liabilities. It can be public limited, private limited, nidhi company, one person company etc. Among all, one person company is the most unheard of. Comparatively, it is a newer concept in India, but more common in other countries.

Private Limited Company (PLC): It requires minimum two members or shareholders to incorporate. The restriction on a maximum number of shareholders is 200. The shareholders can be persons or companies, including foreign companies. They are further categorised as Private Limited Company – Limited by Shares and Private Limited Company – Limited by guarantee.

One Person Company (OPC): It is mainly a sole proprietorship, having advantages of limited liability and corporatization. It opportune individual entrepreneurs, since OPC can be formed with just one Director and one member.

Private Limited Company and One Person Company are closely similar to each other, in terms of their structure, minimum member requirement, suffix mandates etc.

  1. Both are governed by Companies Act 2013.

  2. Both need to be registered under the Ministry of Corporate Affairs. In other words, ‘Certificate of Incorporation’ is a mandate to start a business.

  3. Both types of companies are separate legal entities. The individual owners, shareholders or members are not liable to pay debts or losses of the business through personal assets.

  4. Taxation rules on income generated from the business are same, as per the rates defined in the provisions of the Income Tax Act.

  5. An auditor is obligatory to be appointed within 30 days from the date of incorporation. This condition is irrespective of share capital or turnover of the company.

Having a base understanding of both the forms, here’s a detailed list of differences between the two:

Features

Private Limited Company

One Person Company

Mandate suffix in company name

Private Limited

OPC Private Limited

Minimum paid-up capital required

There was a limit on minimum capital of Rs. 1,00,000. However, it has been relaxed in the Companies Amendment Act, 2015.

No necessary requirement on minimum capital. However, when minimum capital exceeds Rs. 50 Lakhs, it becomes a mandate to convert OPC to a PLC.

Minimum and maximum number of members

2-200

Minimum and maximum 1 member is allowed.

Minimum and maximum number of directors

2-15

1-15

Conversion

A PLC is inconvertible to OPC.

An OPC can be converted to PLC if it meets any one of the following conditions:

1. It has completed two years after its incorporation.

2. Minimum paid-up capital has exceeded Rs. 50 lakhs.

3. Its turnover has exceeded the threshold limit.

Transferability of shares

Shares can be transferred easily with the consent of other shareholders.

Memorandum of Association needs to be altered to transfer shares.

Board meeting

It is a mandate to hold a quarterly board meeting. The maximum gap between two meetings can be 120 days.

It is a mandate to hold a biannual board meeting i.e. every 6 months. There must be at least 90 days between the two meetings. In case of one director, there is no compulsion of the board meeting.

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