Private Limited Company and One Person Company (OPC) are both regulated by the Companies Act and share many similarities. However, it's important to understand their differences before choosing the right legal structure for your business.
In this blog, we'll discuss the distinctions between Private Limited Company and OPC in detail, helping you make an informed decision when registering your business.
Difference between Private Limited and One Person Companies
Although we will explore each legal structure in the upcoming sections, let's currently delve into a comparative analysis between these two entities.
Private Limited Company
One Person Company
Suitable For
Financial Services, Tech Startups, Medium Enterprises
Franchises, Retail Stores, Small Businesses
Shareholders/ Partners
Minimum - 2
Maximum - 200
Minimum - 1
Maximum - 1
Nominee
Not required
One Nominee mandatory
Minimum Capital Requirement
No minimum capital requirement
No minimum paid-up capital requirement exists. However, the minimum authorized capital required is Rs. 1,00,000 (One Lakh)
Tax Rates
The basic tax rate, excluding Surcharge and Cess, is 25%
The applicable Tax rate to the OPC would be 25%, excluding cess and surcharge
Fundraising
Multiple options for Fundraising
Limited options for Fundraising
ESOPs
Can issue ESOPs to the Employees
Unable to issue ESOPs to the Employees
DPIIT Recognition
Eligible for DPIIT recognition
Ineligible for DPIIT recognition
Transfer of Shares
Shares can be easily transferred by amending AOA
Transfer of shares isn’t possible; it can only be done in case of transfer of ownership
Agreements
Duties, Responsibilities, and other basic clauses outlined in MOA and AOA
Duties, Responsibilities, and other basic clauses outlined in MOA and AOA
Compliances
• More compliance costs
• Mandatory 4 Board Meetings
• No mandatory audits till a specified threshold limit
• Less Compliance Costs
• Minimum 2 Board Meetings
• Mandatory Audits
Foreign Directors
NRIs and Foreign Nationals can be Directors
No foreign directors are allowed
Foreign Direct Investment
Eligible through Automatic route
Not eligible for FDI
Mandatory Conversion
No mandatory conversion
If annual turnover exceeds Rs. 2 Crores or paid-up capital exceeds Rs. 50 lakhs, then mandatory conversion into a private limited company
While we have provided some context on the differences between a private limited company and an OPC, let's break down their features and registration process in detail. This will help you figure out which one suits your business needs best.
What is a Private Limited Company?
In India, a Private Limited Company is the most prevalent form of company registration, regulated by the Companies Act of 2013 under the Ministry of Corporate Affairs (MCA). Startups and businesses aiming for growth & stability often prefer this structure due to its flexible ownership and effective management.
There are multiple features that collectively make a Private Limited Company an attractive and versatile business structure, combining limited liability protection and growth opportunities. Some key features include:
1. Limited Liability
- The liability of the Shareholders is limited to the amount invested in the company, protecting personal assets from business debts and liabilities.
2. Separate Legal Entity
- A Private Limited Company is considered a distinct legal entity from its owners, providing legal recognition and enabling it to enter contracts, sue, or be sued in its own name.
3. Perpetual Succession
- The company continues to exist despite changes in ownership, ensuring continuity even if shareholders or directors change.
4. Fundraising Opportunities
- Private Limited Companies can issue shares, making it easier to attract investors and raise capital for business expansion.
5. Transferability of Shares
- Shares can be transferred to others, facilitating the ease of ownership transfer and potential exit strategies for shareholders.
Private Limited Company Registration
The Ministry of Corporate Affairs (MCA) has implemented an efficient online process for the incorporation of companies known as the Simplified Proforma for Incorporating Company Electronically Plus (SPICe+). This form is divided into two integral parts: Part A and Part B.
1. Sole Ownership
- An OPC is owned and operated by a single individual, known as the sole shareholder or member. This individual holds all the shares of the company, consolidating ownership in a singular capacity.
2. Limited Liability
- Similar to other corporate structures, OPCs provide limited liability to the sole owner.
3. Separate Legal Entity
- OPCs enjoy the status of a separate legal entity distinct from the sole owner. This legal separation allows the company to enter into contracts, own assets, and engage in legal proceedings in its own name.
4. Perpetual Succession
- Even with just one member, the OPC has the feature of continuous succession. The nominee chosen while incorporating the OPC often takes over when the sole member is unavailable.
- Obtain a Digital Signature Certificate through listed Government Certifying Agencies.
- Part A of SPICe+ involves the facilitation of 'Name Reservation.' This section allows applicants to propose two potential names for the company, along with the option for re-submission if needed.
- Part B of SPICe+ includes essential steps such as-
• Application for the allotment of Director Identification Number (DIN)
• Incorporation of the new company
• Submission of the e-Memorandum of Association (e-MoA) and e-Articles of Association (e-AoA)
• Applications for PAN, TAN, EPFO registration, ESIC registration, etc. - File for the Commencement of Business Certificate through Form INC-20A within 180 days of incorporation.
Following the approval of the SPICe+ Form, the Registrar of Companies (ROC) issues the Certificate of Incorporation, officially affirming the successful registration of your company. This crucial document includes essential details, including the company's name, registration number (CIN), date of incorporation, registered office address, and other pertinent information.
* Effective 15th July, 2024, DSC charges have increased by ₹ 1,000 per DSC, by the Government. This will be chargeable over and above the given prices.
What is a One Person Company?
One Person Companies (OPCs) represent a distinctive form of business structure that allows a single individual to establish and operate a company. They seamlessly integrate the features of a Private Limited Company and the benefits associated with Sole Proprietorship.
Specifically crafted for entrepreneurs and business owners, OPCs are tailored to scenarios where a sole individual assumes ownership, operation, and management responsibilities for the entire business.
Here are key aspects of One Person Companies:
1. Sole Ownership
- An OPC is owned and operated by a single individual, known as the sole shareholder or member. This individual holds all the shares of the company, consolidating ownership in a singular capacity.
2. Limited Liability
- Similar to other corporate structures, OPCs provide limited liability to the sole owner.
3. Separate Legal Entity
- OPCs enjoy the status of a separate legal entity distinct from the sole owner. This legal separation allows the company to enter into contracts, own assets, and engage in legal proceedings in its own name.
4. Perpetual Succession
- Even with just one member, the OPC has the feature of continuous succession. The nominee chosen while incorporating the OPC often takes over when the sole member is unavailable.
This business form combines limited liability, a separate legal entity, and simplified operations, making it an attractive option for small businesses and startups led by a single entrepreneur.
One Person Company Registration
One Person Company (OPC) registration involves a step-by-step process to establish a business structure designed for a single owner. In a similar manner, SPICe+ is also implemented during the registration process to facilitate name reservation and application.
1. Step 1: Apply for DSC
- Obtain a Digital Signature Certificate (DSC) from Government Certifying Agencies with one or two-year validity.
2. Step 2: Apply for Name Reservation
- Apply for name approval through Part A of the SPICe+ form which allows for the submission of up to two proposed names and one re-submission (RSUB).
3. Step 3: Draft the MoA & AoA
- Draft the Memorandum of Association (MoA) and Articles of Association (AoA), which outline the company's objectives, rules, and regulations.
4. Step 4: Apply for OPC Registration
- Submit Part B of the SPICe+ form, along with the necessary documents, including DSC, MoA, AoA, and declarations. Pay the prescribed fee for company registration.
5. Step 5: Appointment of a Nominee
- Appoint a nominee director, as required by OPC regulations.
6. Step 6: File for Commencement Certificate
- Within 180 days of incorporation, file for the Commencement of Business Certificate (Form INC-20A) with the Registrar of Companies.
Upon the successful approval of the SPICe+ Form, an email notification will be sent by the Ministry of Corporate Affairs (MCA), enclosing the Certificate of Incorporation (COI) and the PAN and TAN details of the Company.
This certificate includes crucial details such as the Company Name, Registration Number (CIN), Date of Incorporation, Registered Office Address, Company Structure, and more.
* Effective 15th July, 2024, DSC charges have increased by ₹ 1,000 per DSC, by the Government. This will be chargeable over and above the given prices.
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Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
One Person Company
(OPC)
- Freelancers, Small-scale businesses
- Businesses looking for minimal compliance
- Businesses looking for single-ownership
* Effective 15th July, 2024, DSC charges have increased by ₹ 1,000 per DSC, by the Government. This will be chargeable over and above the given prices.
Our package includes:
- Company Name Registration
- 2 Digital Signature Certificates (DSCs)
- 2 Directors’ Identification Numbers (DINs)
- Certificate of Incorporation(COI)
- MoA & AoA [Applicable for Private Limited Companies and OPCs]
- LLP Agreement [Applicable for LLPs]
- Company PAN & TAN
*Prices and documents can differ based on the company type.
Which company type to register your business with?
Before commencing the registration process for either a OPC or a Private Limited company, it is essential to carefully assess the following factors.
1. Consider the Nature and Size of Your Business
- Evaluate the nature and size of your business. If your operations are on a smaller scale and you are a single operator, opting for OPC registration may be advantageous. Conversely, for larger businesses with substantial employee numbers and capital needs, registering as a Private Limited Company offers greater flexibility in capital raising.
2. Fundraising Requirements
- Assess your fundraising requirements. If your objective is to raise funds through equity, opting for a company structure is essential. However, if you can fundraise through debt options, the OPC structure may work.
3. Compliance Requirements
- Generally, OPCs have fewer compliance requirements compared to Private Limited Companies, making them more suitable for small businesses. Nonetheless, ensure that you are aware of several post-incorporation compliances that come along with each business structure and choose accordingly.
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