What is a One Person Company (OPC)?

by Anujeet Shivam
1 comment

Have you heard about One Person Company? No! Don’t worry, In this article, I’m going to tell you all about One Person Company. If you are thinking to start your own company in the near future, then do read this article till the end as it may help you in incorporating your company. So, let’s get started:-

What is a One Person Company?

What is a One Person Company - Startup Sutra

The concept of One Person Company in India was introduced in the Companies Act, 2013 to support entrepreneurs who are capable of starting a venture on their own by enabling them to create a single person economic entity. One of the biggest advantages of One Person Company (OPC) is that there can be only one member in an OPC, while a minimum of two members is required to incorporate and maintain a Private Limited Company or Limited Liability Partnership (LLP). Similar to a company, a one-person company is a separate legal entity from its promoter, providing its sole shareholder with limited liability protection while maintaining business continuity and being easy to incorporate.

One Person Company - Startup Sutra

Though a One Person Company allows a lone Entrepreneur to operate a corporate entity with limited liability protection, an OPC does have a few limitations. For instance, every One Person Company (OPC) must nominate a nominee Director in the MOA and AOA of the company – who will become the owner of the OPC in case the sole Director is disabled. Also, a One Person Company must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year like all types of Companies. Therefore, it is important for the Entrepreneur to carefully consider the features of a One Person Company prior to incorporation.

Benefits of One Person Company

  • Easy Funding

Like a Private company, One Person Company can also raise funds through venture capital, financial institutions, angel investors, etc. A One Person Company can raise funds, therefore, regulating itself to a private limited company.

  • More opportunities, Limited liability

Since the liability of the One Person Company is limited to the extent of the value of the share you hold, the individual could take more risk in business without affecting or suffering the loss of personal assets. It is the encouragement to new, young and innovative start-ups.

  • Minimum compliances

One Person Company has to face little compliance burden as compared to Private Limited Companies, hence One Person Company can more focus on other functional and core areas.

  • Benefits of being a Small Scale Industries (SSI)
Benefits of being a Small Scale Industries (SSI) | One Person Company | Startup Sutra

A One Person Company can avail the various benefits provided to Small Scale Industries like a lower rate of Interest on loans, easy funding from a bank without depositing any security to a certain limit, numerous benefits under Foreign Trade policy and others. All these benefits can be boon to any business in initial years.

  • The Only Owner

You, only the owner helpful in quick decision-making, controlling and managing the business without following any elongated processes and methodologies as adopted in other companies. The sense of belonging inspires to grow the business further.

  • Credit rating

The One Person Company with bad credit rating may even get the loan. A credit rating of One Person Company will not be material if the rating of One person company is as per norms.

  • Benefits under Income Tax Law

Any commission paid to the director will be allowed as deduction as per income tax law, unlike proprietorship. Other benefits of presumptive taxation are also available subject to the income tax act.

  • Receive interest on any late Payment

One Person company avails all the benefits under Enterprises Development Act, 2006. The newly start-up One Person company is micro, small, or medium, hence they are covered under this act. As per the Act, if buyer or receiver receives any late payment (receives payment after a specified period), then he is entitled to receive interest which is three times the bank rate.

  • Increased Trust and prestige

Any business entity that runs in the form of a company always enjoys increased trust and prestige.

FAQs about One Person Company

Check FAQs about One Person Company on the official government website here:- One Person Company | MCA.GOV.IN

Register your One Person Company Online

One Person Company - India Filings | Startup Sutra

Yes, there are many online companies which offer One Person Company Registration at reasonable rates. But, I personally recommend India Filings because I’ve used their services and I’m satisfied with their service.

My work is to just tell you, it totally depends on you from where you want to incorporate your One Person Company.

Check out The Differences between Sole Proprietorship and Partnership

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