Difference between OPC and Private Limited Company

//Difference between OPC and Private Limited Company

Difference between OPC and Private Limited Company

A One Person Company (OPC) is a company which combines the attributes of a sole proprietorship concern and a company. It has only one member who manages the entire company and as a result does not face any intervention from the inside of the company. The owner is entitled to all the gains (profits) and the losses of the business. Though similar to a Private Limited Company, there is quite a difference between OPC and Private Limited Company.

A Private limited company (Pvt. Ltd. Co.) is a form of company structure which is characterized by the fact that it is a company limited by shares and the issued shares are owned by its promoters only. It is a company which has not been made public and the transfer of its shares to the public is prohibited. Though there are a lot of similarities between these two types of private companies, there are still a lot of grounds that they differ on.

Difference between OPC and Private Limited Company-

Ground of DistinctionOne Person CompanyPrivate Limited Company

Registration Process

The registration process for an OPC is simple and cheap. A one person company has a single member and that contributes to its simplicity and ease in registration.The registration process for a Private Limited Company is comparatively expensive and more complicated. Since it requires the individual registration of all its members (such as directors, promoters, etc.)

Minimum no. of Members

1 members who is both the director and the shareholder2 Directors and 2 Shareholders

Both can be same person as well

Maximum no. of Members

1 member200 members

Shareholding

Owing to the fact that there could be a single shareholder in the company. The maximum shareholding by a single member is 100%.A Pvt. Ltd. Co. requires a minimum of 2 shareholders and so the maximum shareholding is for a single person could be 99% of the total share capital.

Board of Directors

In an OPC, there is no board of directors since there is a single member.It must have minimum 2 directors and maximum 15 directors.

Member Profile

The sole member of an OPC must be an Indian resident and hold an Indian citizenshipThere is no such member profile required. Its members could be Indian citizens, NRIs, PIOs, Foreign Nationals, etc.

 

Note: A Private limited company shall have at least 1 Indian Resident director in the Board

The involvement of an Artificial Entity

An artificial entity (e.g. LLP, Company) cannot register an OPCAn artificial entity can hold shares of a Private Limited Company.

Appointment of Nominees

It is mandatory to appoint a nominee. The nominee must be an Indian citizen and must have resided in the country for at least 6 months in the year preceding registration.It is not mandatory to appoint a nominee

Areas of Business

An OPC cannot do business in areas such as investment, banking etc. and it also cannot invest into shares of other company etc.A Pvt. Ltd. Co. can carry on these activities provided they have prior approval to do so

Nomenclature

The title must have ‘OPC’ Private Limited at the endThe title must have Private Limited (Pvt. Ltd.) at the end.

Relaxations

It does not need to publish Cash Flow statement or conduct Annual General Meeting (AGM)It does not have similar relaxations and it is required to conduct the Annual General Meeting (AGM)

Appointment of Auditor

MandatoryMandatory

Filing of Annual Returns

The OPC is required to file its Balance Sheet along with statement of Profit and Loss Account, Directors Report, Annual Return in Form AOC-4 and MGT-7The Pvt Ltd is required to file its Balance Sheet along with statement of Profit and Loss Account, Cash Flow Statement Directors Report, Annual Return in Form AOC-4 and MGT-7

Voluntary Conversion

Voluntary conversion into a private limited company is not permitted unless-

 

At least two years have expired from the date of incorporation of the OPC.

Though, if the paid-up share capital exceeds rupees 50 lakhs or if its average turnovers exceed INR 2 crores then within two months, the OPC could convert into a private limited company.

 

A private company other than: a company registered under section 8 of the Act or having paid up share capital of fifty lakhs rupees or less and average annual turnover during the relevant period of two crore rupees or less may convert itself into one person company by passing a special resolution in the general meeting.

 

Before passing such resolution, the company shall obtain No objection in writing from members and creditors.

 

Mandatory Conversion

An OPC has to be converted into a Private Limited Company when its annual turnover exceeds Rs.2 crore or the paid-up capital exceeds Rs.50 lakhs.No obligation for mandatory conversion whatsoever

Taxation

OPCs are taxed at 25% (since any company with a gross turnover under Rs.250 crore is taxed at that rate (an OPC has to convert into a Private Limited Company when its annual turnover exceeds Rs. 2 crore) it pays tax at that rate. Private Limited Companies earning less than Rs.250 crore in revenue are required to pay tax at 25% otherwise 30%.

Conclusion

An OPC can prove to be a very efficient business model for small scale businesses. This structure is best suited for businesses operating at a small scale. However, it becomes quite inefficient at larger scales or targeting larger regions owing to its incapability of raising capital (remember it cannot raise capital from outside sources in the form of shares). It has very less scope for expansion as a result and thus the growth of such a company is always under heavy check. The difference between an OPC and Private Limited Company on some of the grounds is more distinguishable while on the other grounds it’s not so much.

 

A Private Limited Company in relation to an OPC, is a much larger version of it considering the size, the no. of members that could participate in it, the scope for growth and expansion and the ease in procurement of funding. Further, it can participate in various business activities even in those in which an OPC cannot. A Private Limited is best suited for larger organizations and those that conduct their business at larger scales and are involved in bigger markets.

By | 2020-05-25T11:55:36+05:30 May 14th, 2020|Categories: Uncategorized|0 Comments

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