Registering a One Person Company (OPC) Private Limited has many advantages when it is compared to Companies and Proprietorship firm.
Here we go with the benefits of registering an OPC:
A. Compliance burden:
The One person Company thus includes in the definition of “Private Limited Company” which is given under section 2(68) of the Companies Act, 2013. Thus, an OPC will thus be required to comply with the provisions which apply to the private companies. However, OPCs have thus been provided with several exemptions and they also have lesser compliance-related burdens.
B. Organized Sector of Proprietorship COMPANY:
OPC will thus bring the unorganized sector of the proprietorship into the organized version of a private limited company. Various small and medium enterprises, that are doing their business as sole proprietors, might thus enter into the corporate domain. The organized version of OPC will thus open the avenues for more favorable banking facilities. Proprietors thus always have unlimited liability. If such a proprietor does business through an OPC, then the liability of the member is limited.
C. Limited Liability Protection To the Directors and Shareholder
The most significant reason for the shareholders to incorporate the ‘single-person company’ is certainly the desire for limited liability.
E. Legal Status And Social Recognition For Your Business
One Person Company is a Private Limited Structure; this is thus the most popular business structure in the world. It also gives suppliers and customers a sense of business confidence. Large organizations, therefore, prefer to deal with private limited companies instead of proprietorship firms. Pvt. Ltd.’s business structure thus enjoys a corporate status in the society which thus helps the entrepreneur to attract a quality of the workforce and it also helps to retain them by giving them corporate designations, like directorship. These designations thus cannot be used by the proprietorship firms.
F. Adequate safeguards:
Death/disability of the sole person is thus provided through an appointment of another individual as a nominee director. On the demise of the original director, the nominee director is required to manage the affairs of the company till the date of transmission of shares to the legal heirs of the demised member.
G. Easy to Get Loan from Banks:
Banking and financial institutions thus prefer to lend money to the company rather than the proprietary firms. In most of the situations, Banks, however, insist the entrepreneurs convert their firm into a Private Limited company before they sanction funds
H. Complete Control Of The Company With The Single Owner
This also leads to fast decision making and execution. Yet he/she can thus appoint as many as 15 directors in the OPC for its administrative functions, without giving any share to them.
K. Perpetual Succession:
An OPC being which is an incorporated entity will also have the feature of perpetual succession and it will make it easier for the entrepreneurs to the raised capital for business. The OPC is thus an artificial entity that is distinct from its owner. Creditors should, therefore, be warned that their claims against the business thus cannot be pressed against the owner.
L. Tax Flexibility and Savings:
In an OPC, it is thus possible for a company to make a valid contract with its shareholder or the directors. This means as a director you can thus receive remuneration, as a lessor you also can receive rent, as a creditor you can thus lend money to your own company and can earn interest. Directors’ remuneration, rent, and interest are thus deductible expenses which however reduce the profitability of the Company and then ultimately bring down the taxable income of your business.
M. Middlemen eliminated:
One Person Companies also enable the small entrepreneurs to set up a company by allowing the shareholders to directly access the target market and also to avail credit facilities, bank loan rather than being forced to share their profits with the middlemen. Thus, such companies will thus provide an opportunity for the various small entrepreneurs like weavers, artisans, etc. to start their own ventures with a formal business structure.
How to incorporate a One Person Company?
Disadvantages of One Person Company