Advantages of Registering a One Person Company (OPC) in India
Registering a One Person Company (OPC) in India provides several benefits tailored specifically for solo entrepreneurs. The Indian corporate law mandates that in an OPC, a Company can be formed with a one person who serves as a director and a member to that company.
The OPC contains several advantages making it a viable option for solo entrepreneurs to incorporate this form of a Company. Some key advantages are listed below:
1. Separate Legal Entity
An OPC is recognized as a distinct legal entity, independent of its owner.
This allows the company to:
Own property.
Enter into agreements and contracts.
Sue or be sued in its name.
This separation enhances credibility with clients, suppliers, and investors.
2. Limited Liability Protection
The owner's liability is limited to the unpaid share capital, shielding personal assets from business debts and liabilities.
3. Ease of Formation
Incorporating an OPC is a straightforward process, often completed online with minimal paperwork.
It mandates the presence of one member and one nominee, simplifying registration compared to other company structures. In this structure, the director and a member could be the same person.
4. Lower Compliance Burden
Simplified compliance requirements of OPC as compared to other companies making it easier for entrepreneurs to focus on growing their businesses without being burdened by legal complexities and regulations.
The paragraph below provides an overview of how OPC mandates fewer compliance requirements than other forms of companies under Indian corporate law.
The OPC are exempted from conducting an Annual General Meetings (AGMs).
The financial statement of OPC could be signed by just single director and there is no requirement for a cash flow statement to be prepared and filed by the director.
The single director in a OPC can also sign the annual return and file it before the Ministry of Corporate Affairs (MCA), without any requirement of a company secretary to sign such annual return.
There is no requirement to meet any quorum of board of directors, unlike other companies.
5. Complete Control
The single member acts as a director and a shareholder, retaining full control over business operations. Which leads to a quick disposal of any business decisions.
6. Perpetual Succession
An OPC enjoys perpetual succession, meaning the business continues to exist independently of the owner’s demise or incapacity.
A nominee is appointed during registration to ensure continuity of operations in such scenarios.
7. Easier Access to Funding
Banks and financial institutions view OPCs as credible corporate entities, making it easier to secure loans and attract funding.
8. Ease of Management
An OPC is simple to manage as it is run by a single individual. Decision-making is straightforward and efficient, with the single individual able to pass ordinary and special resolutions by recording them in the minute book and signing them. This eliminates potential conflicts or delays, ensuring smooth and hassle-free operations for the company.
9. Tax Benefits
OPCs are taxed as separate legal entities, which often results in lower tax rates compared to other business structures, namely, partnership firms and sole proprietorships.
Owners can also claim deductions on business expenses, further reducing the tax burden.
10. Professional Standing
Operating as an OPC enhances the business’s professional image, making it more attractive to customers, vendors, and investors.
It instils confidence in stakeholders due to its formal corporate structure.
11. No paid-up Capital Requirement
OPC only mandates the presence of a minimum authorised capital of INR 1,00,000 (Indian National Rupees One Lac) without any requirement for a paid-up capital to be subscribed by either the Member or the Nominee.
12. Scalability
An OPC can be easily converted into a private limited company as the business grows, allowing for expansion and additional funding opportunities.
This flexibility makes OPCs suitable for entrepreneurs planning long-term growth.
Thus, based upon the above advantages, registering a One Person Company (OPC) in India is an excellent option for solo entrepreneurs seeking the benefits of limited liability, legal recognition, and enhanced credibility. Its simplified compliance structure, ease of funding, and perpetual succession make it an ideal choice for individuals aiming to establish and grow their businesses efficiently.
