One person company vs private limited company - Tax Rupees
One person company (OPC) and private limited company are two different type of business structures incorporate under companies act 2013 and governed by ministry of corporate affairs (MCA). As per provision of section 2 (62) of the companies act 2013, an one person company can be formed with just one person as its director and member-The director and the member of one person company (OPC) can be the same person. It is a type of business structure that allows a sole person to own and manage the entire business operation. An OPC is a separate legal entity which is distinguished from its promoters. It has its own assets and liabilities. According to section 2(68) of the companies act 2013, private limited company is a company having a minimum paid up share capital as may be prescribed and which
• Restricts the right to transfer its share.
• Limits the number of member to two hundred
• Prohibits any invitation to the public to subscribe for any securities of the company.
Following are the main difference between a one-person company (OPC) limited company (PLC)-
1. Company name - In case of one Person Company, the name of company should have suffix (OPC) private limited or (OPC) limited. In case of private limited company the company name should have suffix private limited (PVT.LTD).
2. Number of shareholders - Only one person is required for operating a one person company who acts both, as company’s director and its shareholder. Here the shareholder is sole owner and holds 100% stake of the company. In a private limited company a single person can never hold 100% shares of the company. In order to establish a private limited company a minimum of two shareholders are required. The maximum number of shareholder in a private limited company cannot exceed 200.
3. Foreign participation/Investment - As only Indian citizen and Indian nationals are permitted to commence and operate a one person company therefore foreign direct investment by foreign nationals or NRTs is not allowed. In case of private limited company, foreign nationals, NRTs and foreign entities are permitted to hold shares with prior approval from RBI even 100% foreign direct investment is permitted.
4 .Fund Raising - One person companies (OPCs) can rise equity funding and are eligible for government schemes. As more members or shareholders cannot be added to one Person Company therefore fund raising in an OPC is a difficult take in itself. Private limited company can raise their share from different investor such as venture capitals, Angel investors etc.
5. Control and ownership of company - In one Person Company, directors and shareholders are supposed to be the same individual. The sole member can take and approve/disapprove all decisions. Hence a single person gets complete control of business. In private limited company ownership is shared by at least two members- so all managerial decisions are taken by directors, appointed by shareholder-The ownership in one person company is restricted to only individuals not corporations. Shareholders of the private limited company can be entity, including corporate firms.
6. Business Activities - The one person cannot carry out non-banking financial investment activities including investment in securities. A private limited company may indulge in such activities with prior approval from the RBI.
7. Boards of Directors - To incorporate a one person company, the minimum number of directors required is only one whereas minimum two directors are required to operate the private limited company, out of which one of the director must be resident of India. Both the entities, one person company and private limited company can have maximum up to fifteen directors.
8. Boards of Directors Meetings - In one Person Company board of director meeting must be held twice in a financial year also the gap between two meetings must be of at least ninety days. Annual general meeting or board meeting is not applicable to an one person company in which there is only one directors on its board - private limited companies must converse for board meetings and an annual general meetings (AGM) in a financial year. The maximum gap between two boards of directors meetings should not exceed 120 days.
9. Nomine Requirement - AS there is only one director /member in one person company, the appointment of a nominee must be made during one person company registration. The nominee directors are liable for managing the company in event of director’s death/incapacity to execute his duty. In case of private limited company there is no provision to appoint a nominee.
10. Recommended for - One person company (OPC) is most suitable for small business structures and sole proprietorship firms. Private limited company is the ideal type of business entity for startups and growing businesses.
• Restricts the right to transfer its share.
• Limits the number of member to two hundred
• Prohibits any invitation to the public to subscribe for any securities of the company.
Following are the main difference between a one-person company (OPC) limited company (PLC)-
1. Company name - In case of one Person Company, the name of company should have suffix (OPC) private limited or (OPC) limited. In case of private limited company the company name should have suffix private limited (PVT.LTD).
2. Number of shareholders - Only one person is required for operating a one person company who acts both, as company’s director and its shareholder. Here the shareholder is sole owner and holds 100% stake of the company. In a private limited company a single person can never hold 100% shares of the company. In order to establish a private limited company a minimum of two shareholders are required. The maximum number of shareholder in a private limited company cannot exceed 200.
3. Foreign participation/Investment - As only Indian citizen and Indian nationals are permitted to commence and operate a one person company therefore foreign direct investment by foreign nationals or NRTs is not allowed. In case of private limited company, foreign nationals, NRTs and foreign entities are permitted to hold shares with prior approval from RBI even 100% foreign direct investment is permitted.
4 .Fund Raising - One person companies (OPCs) can rise equity funding and are eligible for government schemes. As more members or shareholders cannot be added to one Person Company therefore fund raising in an OPC is a difficult take in itself. Private limited company can raise their share from different investor such as venture capitals, Angel investors etc.
5. Control and ownership of company - In one Person Company, directors and shareholders are supposed to be the same individual. The sole member can take and approve/disapprove all decisions. Hence a single person gets complete control of business. In private limited company ownership is shared by at least two members- so all managerial decisions are taken by directors, appointed by shareholder-The ownership in one person company is restricted to only individuals not corporations. Shareholders of the private limited company can be entity, including corporate firms.
6. Business Activities - The one person cannot carry out non-banking financial investment activities including investment in securities. A private limited company may indulge in such activities with prior approval from the RBI.
7. Boards of Directors - To incorporate a one person company, the minimum number of directors required is only one whereas minimum two directors are required to operate the private limited company, out of which one of the director must be resident of India. Both the entities, one person company and private limited company can have maximum up to fifteen directors.
8. Boards of Directors Meetings - In one Person Company board of director meeting must be held twice in a financial year also the gap between two meetings must be of at least ninety days. Annual general meeting or board meeting is not applicable to an one person company in which there is only one directors on its board - private limited companies must converse for board meetings and an annual general meetings (AGM) in a financial year. The maximum gap between two boards of directors meetings should not exceed 120 days.
9. Nomine Requirement - AS there is only one director /member in one person company, the appointment of a nominee must be made during one person company registration. The nominee directors are liable for managing the company in event of director’s death/incapacity to execute his duty. In case of private limited company there is no provision to appoint a nominee.
10. Recommended for - One person company (OPC) is most suitable for small business structures and sole proprietorship firms. Private limited company is the ideal type of business entity for startups and growing businesses.
