One Person Company is a business entity that allows operating a corporate entity by a single entrepreneur with limited liability protection.
Following are the advantages and disadvantages of One Person Company:
The advantage of One Person Company
Separate Legal Entity
One Person Company holds a separate legal entity where an entrepreneur is capable of implementing any plan of action regarding a company without awarding any owner, or C level person. One Person company is specifically known for an individual business.
One Person Company has been accounted on the category of a private company. OPC can easily raise funds through angel investors, venture capital and financial institutes. Graduating to a private limited company; OPC can raise funds and continue business.
More Opportunities, Limited Liability
One Person Company holds a lot of efficient opportunities, limited liability since the liability of the OPC 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. This leads to an encouragement to initiate more start-ups and see skilled innovative minds.
- Minimum 1 Shareholder
- Minimum 1 Director
- The director and shareholder can be the same person.
- Minimum 1 Nominee
- Letters ‘OPC’ to be suffixed with the name of OPCs to distinguish it from other companies
Benefits of being a Small Scale Industries (SSI)
OPC can experience various benefits as provided to Small Scale Industries such as easy funding from bank minus to deposit transaction and any security to a certain limit, a lower rate of interest on loans, and can also manifold benefits under Foreign Trade policy and others.
Single ownership is beneficial than having one or more owner. It is highly beneficial in making a quick decision, managing the business without following any suggestions and methodologies, and controlling. It is an individual mind business. The sense of belonging inspires to grow the business further.
One Person Company with a bad credit score can even apply for the loan. The credit score of OPC will not be material if the score of OPC is as per the norms.
Benefits under Income Tax Law
Unlike proprietorship, any remuneration paid to the director is highly applicable as a deduction as per income tax.
Receive Interest on any late Payment
OPC avails all the benefits under Enterprises Development Act, 2006. The newly start-up OPC is micro, small, or medium; hence they are covered under this act. As per the Act, if the 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 the company always enjoys an increased trust and prestige.
The disadvantage of One Person Company
As OPC has more focus on various functional and core areas, OPC have to face a little burden as compared to private limited companies.
Annual Return Filing
One Person Company’s annual return is compulsorily signed by a director. OPC is generally not allowed to receive mandatory requirement of company secretary signature.
High Tax Rate
In the case of One Person Company, you are directly charged 30% income tax. The high tax rate is a big disadvantage of one Person Company.
OPC included in Name
One Person Company is compulsorily mentioned after the company name in brackets. When you initiate the business with a few shareholders, the administration is not dedicated and you end offering impression to the customers.
Not Suitable for Turnover
Experts mostly suggest going for a private limited company than one Person Company when the turnover is a bit high and effective. Setting up OPC, conversion of one Person Company into a private limited company is not believed to be a good decision.
So these were the insights of One Person Company where we presented some real advantages and disadvantages of OPC. We highly believe that this was a productive read for you to come up. With a great decision.