One Person Company vs Private Limited Company

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Among the recently introduced One Person Companies (OPCs), one person businesses are owned and managed by a single entrepreneur. A Limited Liability Partnership, a Private Limited Company, and a Limited Company require two or more individuals to form them, whereas an One Person Company allows a single individual to run and own the business. Therefore, it is a viable option for those seeking to establish an unregistered proprietorship. Here, we compare how to start and manage a One Person Company versus a Private Limited Company in India.

Number of Person Required to Incorporate

It takes two people to incorporate a One Person Company. The Director of the One Person Company and the Nominee Director, who takes over management in case the Director is unable to perform his duties. The incorporation of a Private Limited Company requires two persons.It takes two people to incorporate a One Person Company. The Director of the One Person Company and the Nominee Director, who takes over management in case the Director is unable to perform his duties. The incorporation of a Private Limited Company requires two persons.

Board of Directors

A One Person Company does not have a Board of Directors since it can be managed by a single individual. Likewise, a One Person Company does not have a Board of Directors or Annual General Meetings. A private limited company has a Board of Directors consisting of at least two Directors and a maximum of seven Directors.A One Person Company does not have a Board of Directors since it can be managed by a single individual. Likewise, a One Person Company does not have a Board of Directors or Annual General Meetings. A private limited company has a Board of Directors consisting of at least two Directors and a maximum of seven Directors.

Shareholding

In a one-person company, you can own 100% of the shares. A private limited company requires a minimum of two shareholders, so you cannot own 100% of the shares.In a one-person company, you can own 100% of the shares. A private limited company requires a minimum of two shareholders, so you cannot own 100% of the shares.

NRI or Foreign Nationals

In India, there is no restriction on starting a One Person Company. Private Limited Company can be started and managed by NRIs and Foreign Nationals. 100 % FDI is allowed in a number of sectors if the company is a Private Limited Company.

Compliance Requirements

It is almost the same for a One-Person Company and a Private Limited Company. In addition to filing annual returns with the Ministry of Corporate Affairs and Income Tax Returns with the Income Tax Department, both a One-Person Company and a Private Limited Company are required to have their accounts audited every year.

Limitations

One Person Companies must be converted into Private Limited Companies when their annual sales turnover surpasses Rs.2.00 crores or if their paid up capital exceeds Rs.50 lakhs. There are no such limitations or requirements for mandatory conversion for a private limited company.

Post Incorporation

In spite of the recent introduction of One Person Companies in India, some government departments and banks have not yet updated their systems or forms or procedures for dealing with them. As a result, obtaining certain licenses or registrations after incorporation can be difficult.

Having been around for decades, private limited companies are the most popular corporate entity type in India; therefore, the registration and licensing process will be relatively straightforward after incorporation.

Conclusion

One Person Companies have many similarities in nature such as cost of incorporation, number of people required to incorporate, and compliance. When it comes to limitations, One Person Companies have more restrictions than limited companies when it comes to foreign promoter participation, mandatory conversion to private limited companies, etc. 

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