Why is OPC better than Private Limited?
Why is OPC better than Private Limited?
The primary objective of a One Person Company was to encourage entrepreneurship and MSMEs’ corporatization. It gives all the benefits of a Private Limited Corporation, such as perpetual succession, being a distinct legal entity, and protecting individual assets from the firm’s obligations.
The Companies Act of 2013 established the One Person Company (OPC) in India. It benefits one person to own and manage their company and gain the advantages of both a sole proprietorship and a corporation. The Companies Act of 2013’s implementation made this idea possible.
Benefits of OPC
A One Person Company (OPC) is increasingly becoming the preferred business structure for entrepreneurs in India, as it offers numerous benefits over a private limited company. A One Person Company is a hybrid business structure, combining the advantages of a proprietorship with the benefits of a private limited company. Following are some reasons why a One Person Company is better than a private limited company.
Easy to Manage and Maintain
The primary advantage of setting up a One Person Company is that it is relatively easy to manage and maintain. The business is registered with the Ministry of Corporate Affairs, and the entrepreneur is the sole owner, making the decision-making and implementation process more straightforward and faster.
Low Cost of Maintenance
A One Person Company requires less capital than a private limited company and has fewer regulatory compliance requirements, making it a cost-effective option for entrepreneurs. The maintenance costs for a One Person Company are also lower than those of a private limited company, as it does not have to comply with the various regulations imposed on private limited companies.
Limited Liability
One of the significant benefits of a One Person Company is that the owner’s liability is limited to the extent of their investment in the company. This means that if the company incurs any losses, the owner’s personal assets are not at risk.
Greater Access to Financing
One Person Companies are eligible to receive financing from venture capitalists and other private equity investors, which is impossible for proprietorships. This makes it easier for the One Person Company to raise the capital necessary for its operations.
Easy to Transfer Ownership
A One Person Company can be easily transferred to another person without legal hassles, making it an attractive business path for entrepreneurs who want to pass on their business to a family member or a third party.
Difference between OPC and Private Limited
Refer to the below table to better understand the difference between a One Person Company and a Private Limited Company:
|
Category |
One Person Company | Private Limited Company |
|
Minimum number of members |
The minimum and maximum is 1. |
Minimum is 2 and maximum is 200. |
|
Minimum number of Directors |
The minimum is 1 and the maximum is 15. |
Minimum is 2 and maximum is 15. |
|
Conversion |
OPC can be converted into PVT LTD after two years if turnover exceeds 50 lakh. |
PVT LTD can be converted into OPC if turnover is below 50 lakh. |
|
Shares transferability |
OPC share transfer can be conducted by altering the Memorandum of Association. |
Private Limited Company, shares can be transferred easily. |
| Board Meetings | If there is more than one director, a meeting must be held twice a year (each half). |
A meeting must be heald in each qurter of the year. |
In conclusion, a One Person Company is better than a Private Limited Company for entrepreneurs looking to establish a business in India. It is easy to manage, cost-effective, provides limited liability, and offers greater access to financing.
