Difference Between One Person Company and Private Limited Company

 One Person Company (sometimes known as an OPC) is a type of entity owned by a single individual. It enables a single individual to own and manage the entire organisation. The OPC as a business structure was recently introduced in India by the Companies Act 2013 to govern and promote proprietorship enterprises in an organised manner. This is the structure that offers the advantages of corporate structure to people who do not want a partition in firm ownership.   

As a result of the ownership and control features, it is compared to a sole proprietorship firm. Yet, because of its registration process, corporate structure, and attributes, it is frequently likened to private companies. The OPC is a sort of Private Limited Corporation as well, but with minimal distinction. The Indian Companies Act 2013 governs OPC registration and activities in the same way as it governs Private Limited Companies. Because their basic characteristics are similar, this blog provides a clear explanation of OPC vs Private Limited Company, allowing you to determine the best option between the two.         

Major Differences Between OPC and Private Limited Company

Number of Persons for Incorporation

Two people are required to form One Person Company. The One Person Company’s Director and Nominee Director is in charge of the Company. Two people are necessary to form a Private Limited Company.  

Board of Directors 

The minimum number of directors necessary for an OPC is one, whereas two are required for a Private Company. In both circumstances, the shareholders can serve as both a shareholder and a director. For the maximum number of directors of any firm, the individual must have a Director Identification Number (DIN). 

Compliance Requirements

One Person Company and a Private Limited Company have nearly the same compliance needs. Both One Person Company and a Private Limited Company must file annual filings with the Ministry of Corporate Affairs and income tax returns with the Income Tax Department. Each year, both One Person Company and a Private Limited Company must have their accounts audited.  

Business Activities 

Some business operations are prohibited, and OPC Company Registration is not permitted. Actions such as non-banking financial activities, securities investing, and so on are prohibited for any OPC as an organisation. A private company may engage in such operations with the prior approval of the relevant regulations.   

Foreign Nationals

Only Indian citizens and nationals are permitted to establish One Person Company. NRIs and foreign nationals can establish and manage private limited companies. A private limited company can receive 100 % FDI in a variety of industries.   

Fundraising 

Because OPC can only have one member, investors cannot raise funds in the form of equity investment. Yet, for a private company, fundraising through the issuance of equity is available in a variety of forms, including private placement, right issues, Venture Capital, and so on. Also, internal funding has a nicer face than OPC because there are multiple to contribute to.      

Audit and Annual Compliance 

Any company registered under the Indian Companies Act 2013 must undergo an audit. Likewise, for the Yearly Compliance section. Within 30 days of registration, both the OPC and the Private Company must hire a statutory auditor. For each fiscal year, the Annual Compliance will compromise filing documents with the Ministry of Corporate Affairs. Furthermore, both must file income tax for each fiscal year.     

Conclusion 

Every organisation comes with both advantages and disadvantages. If the above-mentioned traits are used to balance the merits and demerits in a practical setting, it will be simple to determine which structure is best for a certain organisation.

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