Top 11 advantages of One Person Company (OPC) in India

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. 

What are the 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.

• Minimum one nominee
  • There must be a name formed by the OPC to distinguish it from other companies. 
• Benefits of being a Small Scale Industries
  • 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.  
• 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 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. 

We’ve talked about the advantages of OPC, but it’s equally important to understand the limitations of OPC registration that can outweigh these constraints.

What are the disadvantages of One Person Company?

• Management and Ownership
  • There is no difference between ownership and management in OPC because only one member is the company’s 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 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 included in 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. 
• 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. 

Check out the provisions of OPC under compaies Act 2013.

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.

Conclusion

In conclusion, the advantages of one person company are several, such as being a separate legal entity, easy funding opportunities, limited liability, and benefits under income tax laws. However, it is essential to consider the drawbacks, including concentrated management and ownership, suitability primarily for small businesses, and operational restrictions.

Ultimately, while OPCs provide unique benefits, potential limitations should be carefully weighed to determine their suitability for individual business goals and circumstances.

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