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OPC Vs PLC
In this article we discuss One Person Company Vs Private Limited Company. We dive into the basics and features of an one person company and and private limited company. Further we talk about the differences and similiarities between the two as well.
Both these types of companies are suitable for small businesses. Also, they are incorporated under the Companies Act 2013. And small businesses might have a trouble in choosing between the two. Hence. we try to highlight the differences between the two in this article.
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One Person Company Introduction:
OPC i.e. ‘one person company’ is a step towards ease of doing business in india. The concept of OPC is new in India. But it is a very successful form of business in UK and several European Countries. An OPC is a hybrid structure. It combines most of the benefits of a sole proprietorship and a company from of business. And it also does away with the hassles of finding a co-partner/s for starting a business. Before the introduction of an OPC, starting a company required atleast 2 members. That is 2 directors and 2 shareholders at minimum. So for the person wanting to venture alone, the only option was proprietorship. However, an OPC is a single person business. It can have just one shareholder and one director. And a single person can be both!
Private Limited Company Introduction:
One Person Company Vs Private Limited Company:
Difference between a one person Company (OPC) and a Private Limited Company (PLC):
| Sr No. | One Person Company (OPC) | Private Limited Company (PLC) |
|
1 |
Number of Members |
|
| So a single individual can open an OPC. And that individual becomes the shareholder and the director. However, It is mandatory to nominate a person while forming and OPC. | Minimum 2 directors and Shareholders required. Further, foreign nationals can be members. | |
| 2 |
Type of Members |
|
| Following cannot be member of an OPC: A minor A Non-resident A person incapacitated to contract Persons other than natural person (living human being). But only a “NATURALLY BORN” Indian who is also a resident of India is eligible to incorporate an OPC. Thus, only a natural person who is an Indian citizen and resident in India can incorporate an OPC. And the same conditions apply for the nominee of the OPC. |
Following can be member of an PLC: A minor (with a few conditions) A Non-resident. Persons other than natural person (living human being). |
|
|
3 |
Nominee |
|
| An OPC needs to have a nominee. A person who cannot be a member of an OPC also cannot be nominee. A nominee for OPC has to be a natural person who is an Indian citizen and resident in India. A single person cannot become a nominee in more than one OPC. | A Private Limited Company does not require a nominee. | |
|
4 |
Succession |
|
| The Nominee becomes the member in the following situations: 1. In the event of the sole member’s death; or 2. Also, in the event of the sole member becoming incapacitated to contract. |
Although both have a perpetual succession. However, a Private Limited Company has relatively less succession issues. And it does not require a nominee. | |
|
5 |
Restrictions |
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| A single person cannot become a nominee in more than one OPC. The words “one person company” should surely be mentioned in the name. Above all, maximum turnover allowed is Rs. 2 Crore and Capital 50 Lakh. |
There is certainly no requirement for a nominee in a PLC. The words “Private Limited” surely have to be mentioned in the name. There are no turnover/capital limits for a private limited company. |
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6 |
Conversion |
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| On reaching a turnover of Rs. 2 Crore, we have to convert an OPC. So it is converted into a regular Private Limited Company. Also, the same applies if the share capital exceeds Rs. 50 Lakh. | An OPC is converted into a PLC on crossing the limits. Besides, a private limited company can be taken public. So it can be converted into a public limited company. |
One Person Company Vs Private Limited Company:
Similarities between a One Person Company (OPC) and a Private Limited Company (PLC)
| Sr No. | Particulars |
| 1 |
Governance and Laws |
| Both OPCs and PLCs are governed by the Companies Act 2013. | |
| 2 |
Constitution |
| We classify OPC as a private company for all the legal purposes with only one member. All provisions related to a private company are applicable to an OPC (unless expressly excluded). | |
| 3 |
Liability/Legality |
| The members of both a PLC and an OPC have limited liability. Though upto the extent of the value of their shares. Further, a PLC and OPC is a separate legal entity from its member. That is the personal assets of the shareholders are not liable for any loss incurred by the business. | |
| 4 |
Audit and other compliance |
| An OPC needs to appoint an auditor within 30 days of its incorporation. Although auditor appointment provisions are quite similar to a regular private limited company. Other compliance are relatively less when compared to a regular company. | |
| 5 |
Taxes |
| Presently, the income tax act does not differentiate between a regular company and a OPC. Thus taxation of income of both the entities is at the same rate as per the provisions of Income Tax Act | |
| 6 |
Restrictions |
| A one person company has to restrict the rights to transfer its shares. Though a PLC also restricts rights to transfer shares to a certain extent. However, both an OPC and a PLC cannot invite the public to subscribe to the securities of the company. |
Summary
One Person Company Vs Private Limited Company. A One Person Company sure has lots to offer to small businesses. The benefits of starting a venture on your own. Not needing huge capital to get the business started. The advantage of limited liability and separate legal existence. However, If you need foreign investments or are a foreign investor than a private limited company would be your only option between the two. Also even for medium sized businesses, an OPC would not work. This choice would ultimately depend on the type of business and the scale. For small businesses, an OPC may prove to be better. For medium businesses, a private limited company may be better.
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