Through the new companies act 2013 was introduced a new concept to India, OPC or the one person company. This business entity is quite popular in Europe, USA, China and several other countries across the world. With the government pushing make in India plans OPC is turning out to be a great option for the budding entrepreneurs in the country who want to go solo. The best thing about OPC is that it works exactly like a company with the added benefits of just having one member and one shareholder.
Before you plan to go for OPC to start your business here is a brief overview of both the pros and cons of this new business entity:
- It provides greater flexibility and operational ease to professionals looking who are operating independently and still want to enjoy the benefits of a company.
- It helps in providing an independent structure to businesses owned by a single person.
- Startups as OPC are not required to include cash flow statement in their financials.
- The company and the personal assets of the owner remain distinct and in case of any credit default the personal assets are protected and not subjected to any sort of risk.
- OPCs are required to just conduct minimal of two board meetings every year.
- OPC helps single founders and entrepreneurs to get the experience of running a Private Limited Company.
- As there is no requirement of a nominee shareholder in the OPC, it will be a benefactor of the FDI in India.
- The tax levied on an OPC is more compared to the sole proprietorship which includes 30% base tax and a number of other additional taxes. This high tax rate is one of the major hindrances of forming OPCs.
- The registration process of OPC is similar to a Private Limited company and requires both time and money for it.
- The investor preference is quite low in OPCs compared to other business entities.
- If the capital goes beyond a certain limit then the OPC needs to be converted into a Private limited company.
- Not suitable for entrepreneurs who are trying to experiment with their venture as the winding up process is not quite easy.
- Therefore for people who are trying to get their brand new business run through an OPC must be well aware about both the ins and outs.