Home Company Advantages of One Person Company

Advantages of One Person Company

June 28, 2016

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As per provision of section 2(62) of the Companies Act, 2013 defined (62) “one person company” means a company which has only one person as member. For the formation of OPC [Rule 3] the following conditions must be followed:

Only a natural person who is an Indian citizen and resident in India-

shall be eligible to incorporate a One Person Company;
Shall be a nominee for the sole member of a One Person Company.

The term “resident in India” means a person who has stayed in India for a period of not less 182 days immediately preceding one calendar year.

One Person company can be registered only as a Private
The paid up capital of the OPC cannot exceed 50 Lakhs.
Its average annual turnover cannot exceed 2 crores.
A person can incorporate a maximum of 5 OPCs.
One Person Company can appoint maximum 15 Directors, but minimum should be one Director.
An OPC is required to give a legal identity by specifying a name under which the activities of the business could be carried on. The words ‘One Person Company’ should be mentioned below the name of the company, wherever the name is affixed, used or engraved.
Member/Shareholder of the One Person Company acts as first Director, until the Company appoints Director(s).

Here are the 10 reasons why any entrepreneur or business ENTITY SHOULD opt for OPC. The advantages of being an OPC are as follow:

A Separate legal entity

OPC is separate legal entity and capable of doing everything that an entrepreneur would do.

Annual general meetings

In OPC there is no need to hold such meetings only the resolution which shall be required to communicate to the members. The date on which is signed by the members are considered as meetings. One Person Company need not to hold any AGM (Annual General Meeting) in each year Holding Annual General Meetings.

Exempted from performing certain formalities

Under OPC in case the Board consists of only one director, then the OPC will not be required to conduct a Board meeting as well. There is no requirement of appointing a first director for OPC. Apart from this, OPC is also exempted from provisions relating to notices of the meetings and any other such stipulation related to meeting like Quorum for Meetings, Proxies and Appointment of Chairman for Meeting, and restriction on Voting Rights etc.

Cash Flow Statement

One Person Company is not required to prepare this.

Easy Funding

OPC can raise its funds through venture capital, financial institutions, angel investors, etc. It can raise funds from others like thus graduating itself to a private limited company.

Additional risk, limited liability

The liability of the OPC is limited to the extent of the value of the share a person hold, the individual could take more risk in business without affecting loss of personal assets.

Minimum regulations

OPC have to face little compliance burden and regulation as compared to other companies, hence OPC can more focus on other functional areas.

Benefits of being a Small Scale Industries (SSI)

An OPC can avail the various benefits provided to Small Scale Industries like lower rate of Interest on loans, easy funding from bank without depositing any security to a certain limit, manifold benefits under Foreign Trade policy and others.

Benefits under Income Tax Law

Any remuneration paid to the director will be allowed as deduction as per income tax law unlike proprietorship. Other benefits of presumptive taxation are also available subject to income tax act.

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 buyer or receiver receives any late payment (receives payment after specified period), then he is entitled to receive interest which is three times the bank rate.