The concept of OPC was first introduced in the Companies Act, 2013. Previously a single person was not permitted to incorporate a company. If a single person wanted to form a company he/she can only get it registered as a sole proprietorship. One Person Company is a company that is incorporated by a single person. 

As prescribed in Section 2(62) of the Act, you can form a company with only 1 Director and 1 member. In this form of the company, there are lesser compliance requirements compared to a private company. Here the Director and the member can be a single person. Hence, OPC means a single individual who can be a resident or NRI, can incorporate his/her business that has all the features of a company and its benefits are similar to the sole proprietorship.

Advantages of One Person Company or OPC

The advantages of an OPC has been explained below:

1.Separate Legal Status

The OPC has a separate legal status from its member. The liability of the single-member has been limited to his/her shares. The member is not to be held personally liable for any type of loss of the company. Hence, the creditors must due to the OPC and not its member or director.

2.Easy Fundraising Options

As OPC is considered a private company, it has many fundraising options. It can raise funds through angel investors, venture capitals, incubators etc. Even financial institutions and banks like to grant funds to a company instead of proprietorship firms. This it is easy for an OPC to obtain funds.

3.Lesser compliances 

The Companies Act, 2013 offers some exemptions to the OPC concerning compliances. It is not mandatory for an OPC to prepare a cash flow statement. The books of accounts as well as of annual must be signed only by the director.

4.Easy to Incorporate

Incorporation of an OPC is easy as only a single member and nominee is required. The same person is the member and director here. The authorized capital for incorporating One Person Company is Rs. 1 lakh but no minimum paid-up capital is required. 

5.Easy Process to Manage the Affairs of the Company

Since a single person is responsible for all the affairs of the company, it can be managed easily. The decision-making process is quick. Even the ordinary resolutions can be entered and signed by a single member. Hence, it is easy to manage and run a company as there will be no delay within the business.

6.Perpetual Succession

The primary feature of the OPC is perpetual succession though it has only a single member. During the time of incorporation of an OPC, the single must appoint the nominee. In case of the death of the member, the nominee runs the company.

Disadvantages of One Person Company or OPC

The disadvantages of an OPC has been explained below:

• It is Beneficial Only for Small Business

OPC suits a small business structure. At all times the maximum number of members the OPC can have is only one. More shareholders or members cannot be added to raise more capital.

• Business Activities are Restricted in an OPC.

The OPC is prohibited from carrying out any Non-Banking Financial activities that also includes the investments to be made in securities by corporate. It also cannot be converted to a company with its charitable objects explained in Section 8 of the Act.

• Management and Ownership

As the ownership and management are with a single person the work process becomes a bit difficult. The sole member takes as well as approves all the decisions. There are no differences between ownership and control and sometimes it can lead to unethical practices.

Checklist to Incorporate an OPC

The checklist to incorporate a One Person Company are as follows:

• Only one member is needed.
• Before incorporation, it is essential to appoint a nominee.
• In Form INC-3, consent of the nominee should be obtained.
• As per Companies(Incorporation Rules), 2014 the name of the OPC must be selected.
• Authorized minimum capital is Rs. 1 lakh.
• DSC is required of the proposed director.
• Proof of having a registered office.

Conclusion

An individual can only register one OPC until it loses its status. There is a tax slab of 30% for an OPC which is equal to a Private Limited Company. The most significant advantage of incorporation of an OPC is its limited liability.

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