Have you started a business and want to register a company in India but don’t know how to start? The two most popular forms of business entities that operate under the Companies Act regulations are one-person companies and private limited companies. Each entity has unique features, benefits, and compliance requirements, making it difficult to choose between the two.
This guide will explore the key differences between OPC vs. Pvt Ltd, helping you determine which structure best fits your business.
What is One Person Company (OPC)?
A one-person company(OPC) is a business structure introduced under the Companies Act, 2013. Let’s understand the meaning of a one-person company in simple words.
This business structure is designed for solo entrepreneurs, allowing a single individual to operate a company as the owner and the director. The OPC is ideal for those who want to enjoy the benefits of limited liability and legal recognition.
What is a Pvt Ltd Company?
The Private Limited Company is a business structure held privately by its members. It is widely distributed among a minimum of two and a maximum of 200 shareholders as per the Companies Act 2013. The main benefit of Pvt Ltd company is that shares can not be traded publicly.
It establishes a separate legal identity and treats the company as distinct from its owner. This business structure is ideal for companies that want to expand, attract new investors, and raise funds, as it offers seamless share transfer.
Understanding OPC vs. Pvt Ltd Company
Here is a detailed comparison between OPC vs. Pvt Ltd.
Number of Members:
The private limited company requires a minimum of 2 and a maximum of 200 shareholders to acquire a private limited entity in the business. On the other hand, (OPC), a one-person company, requires 100% only one member who can be the owner and director.
Offers Limited Liability:
Both Pvt Ltd and OPC offer limited liability. This means that any members’ assets are kept separate from the company assets in case of debt or other legal obligations. With this offered limited liability, individual assets can be protected.
Compliance and Meeting requirement:
In a private limited company, regular board meetings are mandatory. It should hold a minimum of four meetings annually.
In a one-person company, no regular board meetings are required.
Transfer of Shares:
The transfer of shares in a private limited company is easier than in a one-person company (OPC), as the process for ownership transfer is seamless.
In the case of OPC, it is a bit of a complex process, as a one-person company requires a nominee to take over ownership in case of death or any uncertainty.
Taxation:
Taxation rates in both business entities are identical under the Income Tax Act of 1961. However, taxation may vary based on effective financial planning in the business.
Investment and Funding:
In OPC vs. Pvt Ltd Company, the ability to raise investment and funding in a venture depends on selected business entities.
The private limited company can acquire funds effortlessly from financial institutions or other investors. On the other hand, in OPC, raising investment is difficult due to solo ownership.
Comparison between One Person Company vs. Private Limited Company (OPC vs. Pvt Ltd Company)
Let’s compare an OPC (One Person Company) and a Private Limited Company (Pvt Ltd).
|
Feature |
OPC (One Person Company) |
Private Limited Company (Pvt Ltd) |
|
Ownership |
Owned by a single individual. |
Owned by at least two and up to 200 shareholders. |
|
Number of Directors |
Minimum 1, maximum 15. |
Minimum 2, maximum 15. |
|
Shareholders |
Only one shareholder allowed. |
Minimum 2, maximum 200 shareholders. |
|
Raising Funds |
Cannot issue shares to raise equity funding. |
Can issue equity shares and attract investors. |
|
Liability |
Limited to the owner’s shareholding. |
Limited to each shareholder’s shareholding. |
|
Compliance Requirements |
Fewer compliance requirements compared to Pvt Ltd. |
Higher compliance, including board meetings, filings, etc. |
|
Suitable For |
Solo entrepreneurs and small businesses. |
Startups, growth-oriented businesses, and ventures seeking funding. |
|
Tax Rates |
Same as Pvt Ltd; corporate tax rate applies. |
Same as OPC; corporate tax rate applies. |
|
Conversion |
Must convert to Pvt Ltd or another structure if turnover exceeds ₹2 crore or paid-up capital exceeds ₹50 lakh. |
No mandatory conversion required. |
|
Legal Recognition |
Separate legal entity from the owner. |
Separate legal entity from its shareholders. |
|
Transfer of Ownership |
Not applicable, as only one owner exists. |
Shares can be transferred or sold to new shareholders. |
|
Attractiveness to Investors |
Limited, as it cannot issue shares. |
Highly attractive due to the ability to issue shares and scale ownership. |
Conclusion:
Choosing between OPC vs. Pvt Ltd Company is a crucial decision that depends upon the selected business structure. Both entities provide unique benefits and features for entrepreneurs. OPC suits businesses with sole shareholders, and a Private Limited Company (PLC) is perfect for multiple members.
We hope this guide helps you understand the difference between the two options and assists you in picking the perfect one.
