One Person Company (OPC) is a private company having a minimum one Director and Member whereas a public company is required to have a minimum Three Directors and Seven members. Earlier it was not possible for a single person to incorporate a Company but now as per Section 2(62) of the Company’s Act 2013, a company can be formed with just one director and one member.
Advantages of One Person Company
- Compliance burden
One Person Company (OPC) is a private company. However, One Person Company has a lesser compliance-related burden as compared to other private companies.
- Perpetual Succession
It is easy for entrepreneurs to raise capital for business as One person Company being an incorporated entity has perpetual succession. OPC is a separate legal entity from its proprietor.
- Simple to Get Loan from Banks
It is easy for One Person Company(OPC) to raise loans from Banks and other financial institutions as they prefer to provide loans to One Person Company(OPC) instead of proprietary firms so it is favorable to register a new business as a One Person company rather than a proprietary firm.
- Annual return filing
Annual return of a company is required to be signed by a company secretary. However, In case of One Person Company it is not mandatory, annual return can be signed by a director of the company.
Disadvantages of One Person Company
- High Tax Rate
As a private company, it cannot avail the benefit of the tax slabs. In the case of one person company income tax is charged 30% of the net profit.
- Consistency Cost
Cost of compliance of One Person Company is higher as compared to a partnership firm.
- OPC is included in Name
One Person Company(OPC) is required to specify a one-person company in its.The owner who has incorporated one person company once is not eligible to incorporate another one person company not as owner and not as nominee of that other company also.
- One Person Management
The company’s success and growth are all dependent on decision making ability. In case of OPC a shareholder makes all the decisions also OPC cannot invest into the shares and securities of a company which is not a part of OPC.
- OPC Incorporation is allowed
Only one OPC can be incorporated at a time. A person cannot incorporate another OPC If he wants to start a new company as an OPC.
- Not suitable for high turnover
In case of high turnover of a business the better option is to incorporate a private limited company than One Person Company. After incorporation of an OPC it cannot be converted into a Section 8 company. However, A private limited company can be converted into a Section 8 company. After incorporating an OPC it cannot be converted to any private or public limited company until the expiry of 2 years from the date of incorporation.