What Is a Private Limited Company?
Contents
A limited company’s members are liable only for the number of shares they own. Private limited companies are privately held companies for small businesses. The public exchange of shares in private limited companies is prohibited. Private limited companies are discussed in detail in the article.
The private limited company, or LTD, has no publicly traded shares and a maximum of 50 shareholders. A private limited company has many benefits, including limited liability and tax deductions, but also some disadvantages, including limited expansion. Explore its definition and benefits.
Overview of Conversion of Private Limited Company to OPC
When a promoter resigns from his/her position as a shareholder in a private limited company, the structure of the company usually collapses. In this case, a professional would recommend the conversion of private limited company into OPC structure; an OPC is a corporate structure that consists of just one shareholder.
Private Limited Companies Converting to OPCs: Benefits
Limited Liability
As a result, sole proprietors are personally responsible for all debts they incur. Most sole proprietors take out loans from individuals or financial institutions. If they are unable to repay them through their business, they will have to reimburse them with their personal assets, such as their cars, homes, and jewelry. One-person companies do not face this problem since liability is limited and personal assets are not at risk.
Ease in Filing Annual Returns
The directors do not need permission to file annual returns from the company secretary before filing them, which is contrary to any business structure. An OPC requires very little compliance with ROCs and yearly reporting.
Ease of Decision-Making
OPCs have the advantage of requiring rapid decisions, which makes operating them simple.
Continuous Existence
The business would have ended with the death of the sole proprietor if the promoter had been a sole proprietor. Nevertheless, a one-person company is legally separate from other companies, and it will pass to the nominee when the owner dies. This is something that will remain the same.
Fewer Compliances
There are fewer compliance requirements for a one-person company due to the only director and shareholder. All mandatory filings are restricted to share certificates and statutory registers.
No AGM Required
Because one-person companies are not required to hold annual general meetings, the laws governing them are less stringent than those governing private corporations.
Conversion of Private Limited Company to OPC
Private limited companies can be converted into one-person companies if certain conditions are met, including:
- In order to become a one-person company, the company must have 50 lakhs in paid-up capital and a turnover of under 2 crores
- The company must obtain a no-objection certificate from all members and creditors before passing a special resolution at an extraordinary general meeting (EGM).
- During the previous calendar year, the shareholder of the proposed one-person company must have spent at least 182 days in India
- To form a one-person company, the private limited company must, through its memorandum, name a nominee and obtain the consent of the nominee.
- All application documents and returns must be submitted to the ROC by the applicant company before undergoing conversion, including its profit and loss account, balance sheet, financial statements, and other books of account; the applicant company must file all returns and documents with the ROC before undergoing conversion;
- The issue of share certificates requires stamp duty; the company is required to file TDS returns for all deductions; the company is required to file GST returns; the company is required to file TDS returns for all deductions.
- Professional tax compliance is the responsibility of the organization.
The minimum number of members and directors for a private limited company is currently two, and an OPC can voluntarily convert to it by passing a special resolution. A written no-objection certificate (NOC) from the creditors is required for the conversion of OPC into a private limited company.