Exploring the 11 Advantages of One Person Company

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Exploring the Advantages of One Person Company
It is very clear to us that One Person Company
(OPC) refers to a company formed with only one
person as a member, it is unlike other companies
having more than one member. Section 2(62) of
the Companies Act says that a one person company
has only one person as its member. So, an OPC is
a company which has only one shareholder as it
has only one member in it, It works similarly to
a Private Limited Company. The advantages of
One Person Company will be focused in this
section.
TABLE OF CONTENTS

• ADVANTAGES OF ONE PERSON COMPANY
• DISADVANTAGES
• FAQS

ADVANTAGES OF ONE PERSON COMPANY

• Separate legal entity
• The first advantage is that an OPC is a separate
  legal entity and can function the same as how
  an entrepreneur works. The One Person Company is
  said to be a separate legal entity. When it is
  spoken legally, a company is a person, which has
  a common seal, and perpetual succession. It has
  the authority to exercise all the functions of
  an incorporated person. 
• Easy Funding
• OPC is a private company, it can raise funds
  through certain ways like financial
  institutions, venture capital, angel investors,
  etc. When it is seen that OPC can raise funds
  then it is gradually building itself into a
  private company.
• More opportunities, Limited liability
• One of the great advantages of OPC is that it has
  a lot of opportunities that it can grab to
  perform with limited liability. It means that an
  individual can take up risk without suffering or
  affecting the loss of personal assets. 
•  Minimum Requirements
•  Here are some basic requirements to have an OPC,
• 1 Shareholder
• 1 Director
• In OPC one of the advantages is that the
  shareholder as well as a director can be of the
  same person.

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• Minimum 1 Nominee
• There must be a name formed by the OPC to
  distinguish it from other companies.
• Benefits of being a Small Scale Industries (SSI)
• An OPC is entitled to avail of the various
  benefits that are provided to small- scale
  industries like easy funding from the bank
  without depositing any security, low interest
  rates on the loan, etc. All these benefits can be
  a great advantage to any business in its
  infancy.
• Single Owner
• In OPC, the single owner is responsible for quick
  decision-making, controlling, and managing the
  business of his own company. The owner of the
  OPC is the one who has all the power to run the
  business. 

• Also read related articles
• OPC Registration Expert Tips for Successful
  Registration Is GST Mandatory for OPC
  Navigating the Tax Landscape Exploring the
  Limitations of One Person Company
• Credit rating 
• The OPC should have a good credit rating. If the
  OPC has a good credit rating, then it has a good
  impression and can easily get a loan. If not, it
  is quite hard to operate the business.
• Benefits under Income Tax Law
• Unlike proprietorship, any remuneration that is
  paid to the director will be considered as a
  deduction as per income tax law and presumptive
  taxation is also available under the income tax
  law.
• Receive interest on any late Payment
• This benefit for OPC is available under
  the Enterprises Development Act, of

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• 2006. According to this Act, if the buyer or
  receiver receives any late payment after a
  specified period, then he can receive interest
  which is three times the bank rate.
• Increased Trust and Prestige
• The OPC that has a good business with good profit
  has a good reputation among the people.  It
  increases its prestige and trust among the
  people. Not only OPC, but any business entity
  that runs in the form of a company enjoys
  increased trust and prestige.

DISADVANTAGES

• Management and Ownership
• There is no difference between ownership and
  management in OPC because only one member is the
  companys director. In OPC, All sorts of
  decisions regarding the business are taken by
  a single person. This Perhaps, can lead
  to unethical commercial activities.
• Only suitable for small businesses
• OPC (One Person Company) will be well-suitable
  for a smaller firm. At any time, the OPC is not
  entitled to have more than one member. To get
  funds for running the business, the OPC cannot
  recruit more members or shareholders.
• Business operations are restricted
• The OPC is restricted to Non-Banking Financial
  Investment activities which include the
  investment in securities of any other corporate
  body.

• OPC is included in the Name
• It is the major disadvantage faced by the OPC.
  After the name of the OPC, it should include
  that it is an OPC in a small bracket. This can
  create a bad impression on the people as they
  think that it is operated by a single person and
  might not be that effective.

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• One Person Management
• It is well known that section 2(62) of
  the Companies Act 2013 provides that the company
  can be formed with one director and one member.
  Likewise, when it comes to the shareholder, the
  OPC can have only one shareholder. Sometimes
  there are chances that the decisions made may be
  vague as they are made by only one person with
  no one to support. 
• Not suitable for high turnover
• The OPCs are not suitable for high turnover, it
  is said so because when there is high turnover
  in a business of an OPC it is automatically
  converted into a private limited company. This
  is positive in some aspects but it can also have
• a great negative impact on certain OPCs.
• Hence, the one-person company enjoys certain
  benefits that help them to develop their
  business and bring them good profit whereas there
  are certain restrictions and disadvantages in
  one Person Company which can sometimes be a
  barrier to the development of the business.

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• FAQS
• What are the advantages of a one person company
  over a sole proprietorship?
• A single member who establishes an OPC does so as
  a separate legal organization. Only the members
  shares are subject to liability. The damage
  suffered by the company is not individually
  accountable to the member. Since OPC is a private
  company, it is simple to generate capital or
  funds.
• What are the challenges faced by OPC?
• Section 8 of the Companies Act 2013 which deals
  with the Formation of companies with charitable
  aims and etc.. says that an OPC cannot be
  incorporated.
• Additionally, an OPC is not permitted to engage
  in non- banking financial investment operations.
• This includes purchasing securities from any
  corporate entity.
• What are the 2 main features of OPC?
• The two main features of OPC are
• 1. One Member An OPC can be founded with only
  one member, who will serve as
• both the companys director and shareholder.

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• 2. Distinct Legal Entity An OPC, like any other
  corporation, is a distinct legal entity from its
  members.
• Does the OPC need GST?
• OPC Companies must register for GST if they
  provide goods or services and their annual sales
  total more than Rs. 20 lakhs for services and Rs.
  40 lakhs for items.
• What is the impact of the one person company?
• OPC will provide the businessperson with all the
  advantages of a private limited company, which
  clearly means they will have access to credit,
  bank loans, limited liability, legal protection
  for their operations, access to the market, etc.,
  all in the name of a distinct legal entity.
• Can OPC convert itself into a charitable company?
• No, an OPC cant be incorporated or converted
  into a company for charitable or non- profit
  purposes and it cannot perform financial,
  non-banking, or investment operations including
  investment in securities of any corporate unit.
• Can OPC have more than one shareholder?
• Under the Companies Act of 2013, a One Person
  Company (OPC) is classified as a Private Limited
  Company. At any given moment, OPC cannot have
  more than one stakeholder. Furthermore, an OPC
  cannot add shareholders in order to raise
  additional cash.