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.

Owning a Private Limited Company- beneficial or not?

Almost everyone knows about Private Limited Companies or may have heard about it. But what is the exact meaning of this term? Some of you may know while some not. So, why not we talk about Private Limited Companies today? The topic of our concern of this article will be the meaning, advantages as well. So, without wasting even a single minute, let’s just start discussing out topic.

Private Limited Companies, as the name suggests are small businesses that are operated privately and there shareholders are restricted to a number of 50, not more than that. These shareholders are restricted to trade any share privately. Unlike public companies, private companies do not require any audits, report results etc. and have completely different rules and regulations. You have to do the Private Limited Company registration in order to get it recognized. You can do the Pvt Ltd registration online. Moving further; I am going to talk about the advantages and disadvantages of Private Limited Companies.

Advantages:

  1. Distinct existence: One of the benefits of owing a Private Limited Company is that you have your own existence. The company has its own set of rules and regulations. They can own their properties and incur debts. The shareholders are at benefit as for any sort of debts they are not liable to the creditors of a company.
  2. Narrow liability: The term narrow here is describing itself as limited. Limited liability is the term which shows that these Private Limited companies are liable in a limited manner when it comes to talk about debts. As compared to partnerships, where the liability in terms of company’s debt is not limited, Private Limited Companies show limited or narrow liability. Shareholders are liable to the number of shares owned by them and not more than that.
  3. Transferability of shares: In case of Private Limited Companies, I can say that you’ll never face any sort of difficulty when it comes about share transferring. It is very easy as well as free. If you compare this with any business based on partnership then you’ll find it difficult which is not in the case of Private Limited Companies. In order to transfer the shares, all you have to do is filling and sign the share transfer form and hand it over to the buyer along with the share certificate.
  4. Borrowing funds: IF you want to borrow funds in any Private Limited Company, then you would be happy to know that the companies can issue debentures, secured as well as unsecured deposits etc. Not only have that but even banks preferred to give more financial assistance to these companies when compared to any partnership business.
  5. Undisturbed existence: These types of companies are not affected by the death or departure of any member as they have their own undisturbed existence and have a perpetual succession which is considered to be one of the most important parts of these types of companies.

Disadvantages:

  1. Registration: Private limited company registration is a time taking process. If we talk about price then Private Limited Company registration fees is high. Here the partnership businesses are benefited as they do not need to be registered. Although you can register any Private Limited Company online but may possess you problems.
  2. Profit sharing: Profit sharing is a big thing in Pvt limited companies as the profit is shared amongst a large number of people.
  3. Restriction in Capital markets: One of the biggest problems faced by Pvt Ltd companies is this restriction and because of that cannot attract or sell shares to any outside investors.

After knowing the two sides of owning a Pvt Ltd Company, one can own it and if want to register then there are many websites that may help you to know Pvt Ltd company registration steps and other information you require. The question that lies here is that whether you want to own a company or not. If you’re planning to start your own company then don’t waste time and register your company soon!