Companies Act, 2013 introduced the concept of One Person Company in India to promote self-employment and to motivate individuals who are capable of starting a business of their own. The need for two directors in a private limited company is eliminated which aids the entrepreneurs to have total control over their entity, and also enjoying limited liability.
Number of Member is the first in the Disadvantages of one-person company, the One Person Company Registration can have a Minimum or Maximum no. of 1 Member. It only allows one person to own and run the entire business. A minor is neither eligible to become a member or a nominee of the OPC nor it cannot hold a share with beneficial interest.
Suitability for small business
The suitability for small businesses plays important role in the disadvantages of a person company as the OPC is suitable only for small businesses. OPC can thus have a maximum paid-up share capital of Rs. 50 Lakh or an annual turnover of Rs. 2 Crores. Otherwise, an OPC needs to be converted into a Private Limited Company.
An OPC is not allowed to carry out Non – Banking Financial Investment activities including the investment in securities of any corporate. OPC is not permitted to convert itself into a Section 8 company.
Related: Advantages of OPC Registration
This is a concept of a legal entity that is being created for a perpetual succession that is the continuation of the company even after the death or the retirement of a member is also challenged. Because the nominee whose name has thus been mentioned in the memorandum of association will, however, become a member of the company in the case of the death of the existing member. But it is doubtful that it would do any good for the company because the person is not involved in the day-to-day operation of the company, and hence he would not be able to succeed in the business after the death of the member.