One Person Company ("OPC") means a company which has only one person as a member and Director. One Person Company model in India is introduced to extend benefit of limited liability available to a private limited company to the sole proprietorship business, while retaining advantage of simplicity and low compliance of proprietorship business model. The OPC Incorporation Rules provide that a natural person who is a resident of India in preceding calendar year (stayed in India for 182 days or more) and who is a citizen of India only can form a one person company, meaning thereby Non-resident Indians or Foreign citizens or other legal entities like companies or societies or other incorporated entities including Association of Persons, Body of Individuals cannot form an OPC in India. Various small and medium enterprises, doing business as sole proprietors, interested in entering into the corporate domain can opt for OPC; however one person cannot incorporate more than one OPC or be the nominee of more than one OPC at any given point of time hence cannot have two different OPCs in his name. Proprietors always have unlimited liability but if such a proprietor does business through an OPC, then liability of the member is limited.
OPC company registration is much smoother as there is lesser
documentation but it may result in higher incidence of taxation for the smaller
sole ventureres due to applicable taxation rate of corporates.
| Advantage | Disadvantage |
|
|
| Proprietorship
Concern | Partnership Firm | Limited Liability
Partnership (LLPs) | One Person Company
(OPC) | Private Limited
Company | Public Limited
Company | |
| Registration
Requirement | Not required | Not mandatory | Registration must | Registration must | Registration must | Registration must |
| Registering Authority | No Registration Required | Registrar of Partnership | Registrar of Companies | Registrar of Companies | Registrar of Companies | Registrar of Companies |
| Suitable for | Small businesses in unorganised sectors | Small businesses in unorganised sectors | Small to Medium businesses in organised sectors | Small businesses in organised sectors | Start up, Growing and Medium size businesses in organised sectors | Medium to large businesses in organised sectors |
| Name Availability | Anything. However should not breach trademark or copyright | Anything. However should not breach trademark or copyright | Anything with prior approval. However should not breach trademark or
copyright | Anything with prior approval. However should not breach trademark or
copyright | Anything with prior approval. However should not breach trademark or
copyright | Anything with prior approval. However should not breach trademark or
copyright |
| Time required for
Setting-up and start of business | Instantly | Instantly | Instantly after setting-up, however incorporation may take 7-10 days | Instantly after incorporation however incorporation may take 7-10 days | Instantly after incorporation however incorporation may take 7-10 days | Instantly after incorporation however business can be started only after
securing Certificate of Commencement of Business after incorporation, which
put together may take 15-21 days |
| Investment
flexibility | Limited | Limited | Limited | Limited | Unlimited | Unlimited |
| FDI Permission | Restricted | Restricted | Flexible | Restricted | Flexible | Flexible |
| Legal Recognition | Not a separate legal entity | Semi-Separate legal entity | Separate Legal Entity | Separate Legal Entity | Separate Legal Entity | Separate Legal Entity |
| Liability Protection | Not Available | Not Available | Limited | Limited | Limited | Limited |
| Existence /
Continuity | Limited | Subjective | ||||
| Min./Max. Members /
Owners / Shareholders | Minimum: 1 | Minimum: 2 | Minimum: 2 | Minimum: 1 | Minimum: 2 | Minimum: 7 |
| Minimum Paid-up
Capital | Nil | Nil | Nil | Nil | ₹ 1 Lakh | ₹ 5 Lakh |
| Income Tax | At Slab Rates | At 30%+SC+Cess | At 30%+SC+Cess | At Slab Rates | At 30%+SC+Cess | At 30%+SC+Cess |
| Profit Distribution
after Tax | Exempt | Exempt | Exempt | Exempt | Taxable | Taxable |
| Statutory Compliances | Minimum | Moderate | Moderate | Moderate | High | High |
| Main applicable laws (This is indicative
list of laws, there could be other laws applicable to a peculiar business
activity / entity) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) |
| Licensing
Requirements (This is an indicative list of licenses. Some
other licenses may also be required depending on underlying business activity /
entity) | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License |
| Periodical
Compliances | Tax & Other Return | Tax & Other Returns | Tax & Other Returns | Tax & Other Returns | Tax & Other Returns | Tax & Other Returns |
| Liquidation /
Dissolution | Easy | Easy | Some legal formalities | Some legal formalities | Moderate legal formalities | Moderate legal formalities |