One Person Company is defined as an establishment that involves only one individual who is the owner and director of the company. A One Person Company has many advantages, which is the reason why it is a common type of company and is created by several individuals. The individual must understand all the benefits so that he can avail all of them. It is a concept mentioned in the Companies Act, 2013.
What are the features of a One Person Company?
It is important to understand the characteristics of an OPC before diving into other factors such as benefits etc.
The business owner of a one person company has a limited liability which is unique feature present in few companies. This means that his liability is limited to the amount he invests in the company or shares he has bought.
The compliances, rules and regulations of a one person company are fewer and thus easier to follow. The rules are less because the business activities of an OPC are lesser in comparison to other types of companies.
One shareholder and director
Since the company involves only one individual, he only acts as both a shareholder and a director
Separate Legal Entity
A one person company has a separate legal entity like a private and a public limited company. The company functions as a separate entity which is separate from its owner.
What are the benefits of a One Person Company?
An individual who is the owner and decision-maker of an OPC has the opportunity to enjoy several benefits. In this section, we will talk about certain advantages that an OPC has over other companies –
An OPC is considered as a separate legal entity which is why it has an independent existence.
Transferability of Shares
The shares of an OPC cannot be transferred as it is not a possibility. The shares of the company are held by only one individual who is the shareholder and if the shares are transferred, it does not remain a one person company.
The liability of a person in a one person company is limited to the amount that he invests in the business and shares he owns. This benefit is one of the common benefits in private and public limited companies.
Presence of a Separate Property
A One person company functions and works as separate property as it has its own identity after OPC Registration. The company functions as a separate legal entity. The company is given the ownership of the assets that is a part of the company.
The owner of the company has full control over the business. All the decision and changes in the company is undertaken only by him.
Flexibility in the company functions
The owner has the flexibility to make any amendments in the company without any other individual’s interference which is a major benefit.
Legal status of the company
The status of the company allows it to avail several loans from any financial institutions and banks as compared to a sole proprietorship.
In an OPC, the individual has the right to create an agreement with its shareholder or directors. This means that as a director the individual can receive remuneration, as a lessor he can receive rent and as a creditor, he can lend money to his company and earn interest.
A One Person Company provides a great level of transparency in the business. This is because as there is an involvement of only one individual in the whole business, he has access to all the financial information and he is well aware of the business strategies, plans and policies. Transparency helps the business in its later stages when of business expansion and fundraising.
What are the minimum requirements for starting a One Person Company?
Understanding the requirements is mandatory for the individual before he applies for one person company registration.
- There is no requirement of a minimum paid-up capital to start an OPC.
- It must have only one individual as a member of the company.
- Memorandum of Association of an OPC will compulsorily mention the name of the person, who in the occurrence of death or disability of the subscriber shall take his position.
- The member of the OPC has the right to change the nominee during any time after mentioning it to the Registrar.
- One Person Company (OPC) can be started as a company limited by share capital or limited by guarantee or unlimited company.
- The words ‘One Person Company’ is required to be specified after the name of a one person company.
- One individual can start only up to one OPC.
- An OPC can be started only by an Indian resident and citizen.
- DIN (Director Identification Number) for all the Directors is a major requirement before starting an OPC.
- DSC (Digital Signature Certificate) for all the Directors is required and it must be acquired for smooth workflow of the company.
What is the difference between the benefits of OPC and Sole Proprietorship?
They may sound to be similar companies but they are different in various terms. In this section, we will discuss all the differences both companies possess.
|CRITERIA||SOLE PROPRIETORSHIP||ONE PERSON COMPANY||WHICH IS BETTER in terms of criteria?|
|Not mandatory||It is mandatory||Sole|
|Not a separate legal entity||separate legal entity||One Person Company|
|Liability of members||Unlimited||Limited||One Person Company|
|Ownership of outsiders||Not allowed||Allowed, if one of the members (director or nominee) is an Indian||One Person Company|
|Transferability of shares||Not allowed||Allowed||One person company|
|Dependency||Dependent on the owner||Not dependent on the owner||One Person Company|
Maximum number of members
|1 individual||2 individuals||–|
|Not a separate entity||A separate entity||One Person Company|
The newest concept of a one-person company has many benefits as described in the article. Thus, it is a good option for individuals who want to start a business on their own. They can enjoy many benefits for several years until they take any major business decision.