The OPC is a hybrid form of business which combines features of Sole Proprietorship and Company. A One Person Company needs only one member who is the sole owner/director of the company as well as being a shareholder. In an OPC the liability is limited to the company and not the members of the company giving the benefit of a Limited Company. Hence, why share the cake when you can own it all.
Indian Residents & Citizens who has a minimum paid up capital of Rs. 1,00,000 and has one person who is the sole owner/director and also the shareholder of the Company can register a One Person Company with the MCA(Ministry of Corporate Affairs). The Foreigners and NRI's are not allowed to formulate an OPC in India.
According to the Companies Act, 2013 it is mandatory to convert a One Person Company into a Private Limited if the paid up capital exceed Rs. 50 Lakh or if the annual turnover is more than Rs. 2 crore. An OPC is a blend of Private Limited and Proprietorship and is beneficial for the small scale firms. OPC is disadvantageous in terms of tax as the base tax rate is around 30% whereas a proprietorship tax is based on individual owning business. OPC however, is a new business forum to bring about transparency, accountability and corporate in small business by a single individual. However OPC offers several benefits as well as has certain limitations which might lead you to confusion.
An OPC has certain benefits for the Indian Entrepreneurs aspiring for business in India and hence it is recommended to setup a One Person Company. Also because it has the combined advantage of the Companies and the Proprietorship firm. The following are the reasons for setting up an OPC;
There are certain don'ts/restrictions for a OPC and they are as follows;
A One Person Company needs to be converted to a Private Limited Company based on the following situations;
If an OPC fulfils any of the above two situations, it is must to convert the OPC to a Private Limited Company or Public Company. This has to be done within six months.
Recommendation: One Person Company is a miniature of Private Limited Company with major restrictions and limitations. It doesn't allow foreign promoters and also is mandatory to be converted to Private Limited after certain conditions are met. Keeping all of the above in concern, QuickCompany always recommends to Incorporate a Private limited Company instead of an OPC for a long term successful business.
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