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One Person Company – What is it all about?

The Companies Act 2013 introduced ‘One Person Company’ as a new legal entity. What a One Person Company or OPC signifies is a Corporate identity for any individual who operates a proprietorship concern, while enjoying benefits of a Private Limited Company.

This is a move welcomed by many proprietors in India. Most of the proprietorship concerns in India are involved in Trading business. While Proprietorship gave them a quick start, what it lacked was the framework which could give impetus to convert their businesses into large scale corporate setups. The OPC concept has opened the doors of Banks (which earlier used to deny credit lines to them) and Export channels to many countries.

Features of OPC


  • Only One Shareholder – A person who is a Citizen of India, as well as a Resident of India is eligible to incorporate a One Person Company.
  • Nominee for the Shareholder – The shareholder has to nominate another person who shall become the shareholder in case of death / incapacity of the original shareholder, with a written consent from the Nominee.
  • Director – An OPC can have at most 15 directors. The Shareholder shall be considered as One Director in case no other Director is nominated
  • Compliances – While OPC has limited liability like a Private Limited company, many compliance requirements such as Annual General Meetings, Preparation of Cash flow statements, etc which apply to Pvt Ltd companies are not applicable to OPC

Advantages of OPC

  • The identity of the Company is distinct from the owner.
  • Limited Liability
  • OPC structure enjoys a corporate status which will help in attracting and retaining quality workforce
  • Banking and Financial Institutions prefer to give loans to a Company rather than proprietary firms.
  • No requirement to hold Annual General Meetings (AGM) or Extra-ordinary General Meetings
  • Fewer ROC filings to be filed with Registrar of Companies
    • OPC is not required to prepare Cash Flow Statement
    • OPC’s Annual Return is required to be signed by the Director, and Company Secretary Signature is not required
  • Mandatory Rotation of Auditor is not applicable
  • The following are deductible expenses which reduce your company’s profitability, and bring down the taxable income of your business
    • As a Director, you can receive remuneration
    • As a lessor, you can receive Rent
    • As a Creditor, you can lend money to your own company and earn interest.

Disadvantages of OPC

  • OPC can have a Minimum or Maximum of only One member
  • A sole owner cannot incorporate more than One OPC, and become Nominee in more than One such company
  • Suitable only for small businesses. OPC can have a maximum paid up capital of Rs. 50 Lakhs, or turnover of Rs. 2 Crore. Otherwise it gets converted to a Private Limited Company
  • OPC cannot carry out Non-Banking Financial Investment activities
  • Basic Income Tax Rate for OPC is 30% on total income. Sole Proprietors are taxed at the same rate as  an individual (10% to 30%, depending on their income)
  • Higher Incorporation Costs
  • Higher Compliance Costs compared to Proprietorships

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