One Person Company (OPC) – Features, Advantage, Disadvantage, Formation Process
In recent years, One Person Company (OPC) has emerged as a popular form of business in India, especially among small entrepreneurs who want to start their own business without the need for a co-founder. In this blog, we will discuss the features, advantages, disadvantages, and formation process of One Person Company.
Features of One Person Company (OPC):
- Single Promoter: As the name suggests, an OPC is owned and managed by a single person who acts as both the director and shareholder of the company.
- Limited Liability: Similar to other forms of companies, the liability of the owner of the OPC is limited to the amount of capital invested in the company.
- Separate Legal Entity: An OPC is treated as a separate legal entity, which means that it has its own legal identity that is distinct from its owner.
- No Minimum Capital Requirement: Unlike other forms of companies, there is no minimum capital requirement for the formation of an OPC. This makes it easier for small entrepreneurs to start their own business.
- Perpetual Existence: The existence of an OPC is not affected by the death or insolvency of its owner. It continues to exist as a separate legal entity, and ownership can be transferred to another person.
Advantages of One Person Company (OPC):
- Limited Liability: The limited liability feature of an OPC protects the owner’s personal assets in case of any financial or legal liability arising from the business.
- Separate Legal Entity: An OPC is treated as a separate legal entity, which provides more credibility and reliability to the business. It also makes it easier to raise funds and access loans from financial institutions.
- Easy Formation: The formation process of an OPC is relatively simple and easy, and it can be done online through the Ministry of Corporate Affairs website.
- Tax Benefits: An OPC is eligible for various tax benefits, including lower tax rates and deductions under the Income Tax Act, 1961.
Disadvantages of One Person Company (OPC):
- Limited Capital: Since an OPC is owned and managed by a single person, the capital investment is limited to the owner’s personal resources. This can limit the growth potential of the business.
- Limited Expansion: An OPC cannot be converted into a public company, which limits its expansion potential. It can only be converted into a private limited company.
- Compliance: An OPC is required to comply with various legal and regulatory requirements, including filing of annual returns, maintenance of books of accounts, and holding of board meetings.
Formation Process of One Person Company (OPC):
The formation process of an OPC involves the following steps:
- Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the owner.
- Choose a unique name for the company and apply for the same through the Ministry of Corporate Affairs website.
- Draft the Memorandum of Association (MOA) and Articles of Association (AOA) of the company and get them signed by the owner.
- File the incorporation documents, including MOA, AOA, and other required documents, with the Registrar of Companies (ROC).
- Once the ROC approves the incorporation documents, a certificate of incorporation is issued, and the company is registered as an OPC.
Conclusion:
One Person Company (OPC) is a suitable form of business for small entrepreneurs who want to start their own business without the need for a co-founder. It provides limited liability, separate legal entity status, and easy formation process. However, it also has its limitations, including limited capital and expansion potential and compliance requirements. It is important for entrepreneurs to weigh the advantages and disadvantages of OPC before deciding to form one.