Private Limited Company v/s One Person Company | Ebizfiling

  Introduction  

 

The Companies Act governs 2 different business structures: OPC and Private Limited Company. One Person Company is a business model that empowers passionate, single individuals to run their own businesses. However, at least 2 people are required for a Private Limited Company.

 

Do you want to establish a new company but are uncertain about which one is the appropriate corporate structure to select? This article will help you with the decision.

 

 What is a Private Limited Company?  

 

A Private Limited Company is a type of company that require a minimum of two members and a maximum of 200 members. The liability of the members of a Private Limited Company is limited to the number of shares owned by them.

 

 What is a One Person Company?  

 

One Person Company is a type of company that has only one person as its member. An OPC is a company that has only one shareholder as its member and the company is operated by that person.

 

Difference between the Private Limited Company and One Person Company

 

1. The OPC can be registered with only one person as the sole shareholder of the company. The sole owner holds 100% stakes in the company. The member must be a natural person, not a company or other artificial entity, in order to register as OPC. He or she must reside in India and attain the age of majority to enter into a contract. The company needs to appoint a nominee. However, a Private Limited Company must have at least two people as the shareholders for the incorporation of the company. The maximum number of shareholders allowed in a Private Limited Company in India is  200. The shares of a Private Limited Company can be held by an artificial person such as a company or LLP.

 

2. There is no minimum share capital is required for establishing OPC. But it should be noted that if the share capital of OPC is more than 50 lakhs, then such OPC will be converted into a Private Limited Company. However, no minimum share capital is required for incorporation of a Private Limited Company in India.

 

3. In the case of an OPC, only one director is required, but a minimum of two persons are required for registering a Private Limited Company. In both cases, the shareholder can serve as both a shareholder and a director. In both cases, the maximum number of directors that can be selected by an ordinary resolution is 15. To be appointed as a  director of either OPC or a Private Limited  Company, a person should hold a Director Identification Number (DIN).

 

4. The OPC is to conduct a board meeting after every 6 months of the financial year which means one meeting in each half of the year. The gap between the two meetings must be at least 90 days. Whereas a Private Limited Company in India has to conduct one board meeting in each quarter of the year. The maximum gap between the two meetings can be 120 days.

 

5. In an OPC the shares can be transferred only after making changes in the Memorandum of Association (MOA) of the company. But the shares of a Private Limited Company can be transferred easily.

 

6. Foreign nationals are not permitted to register as the owner of the OPC in India because such companies only accept Indian citizens as members and no Foreign Direct Investment (FDI) is allowed. However, according to the FDI Guidelines, NRIs, foreign nationals, and foreign companies are eligible to hold shares in a Private Limited Company registered in India. Under the Automatic Route, 100% Foreign Direct Investment is permitted in various sectors of India. But there are still a few sectors that require prior permission from RBI.

 

7. The audit is compulsory for every company registered under the Companies Act, 2013. Both the OPC and the Private Limited Company must appoint a statutory auditor within 30 days of registration. Annual compliance is also mandatory for both companies and the form of each company should be filed with MCA every financial year. Both companies should also file an Income Tax return every year.

 

8. At the end of the name of every One Person Company "OPC" should be added. However, at the end of the name of each Private Limited Company " Pvt. Ltd" should be added.

 

9. There are certain business activities that OPC company cannot perform.  Activities such as non-banking financial activities, securities investing, and so. But a Private Limited Company is permitted to perform these business activities with the prior approval of the relevant regulations.

 

 Conclusion 

 

There is a lot of similarity between One Person Company and a Private Limited Company yet they both are different in many of their characteristics. If you are one person who wishes to start a business One Person Company is definitely for you as the idea of One Person Company (OPC) was introduced to encourage single and enthusiastic entrepreneurs to operate their businesses. While in case you are more than one person who wishes to start the business together, then a Private Limited Company is for you.