Advantages and Disadvantages of One Person Company

A One Person Company is best suited for people who want to go in for a sole proprietorship. Unlike a Sole proprietorship; a One Person Company offers limited liability and separate entity status along with increased trust and respect in the market.

The major advantages of OPC can be summarized as below:
 

1. Safeguards Directors and Shareholder with Limited Liability:

 As per the Act, in a One Person Company, the liability of the single shareholder would be limited to the unpaid subscription money in his name.

2. Perpetual Succession:

 As per the provisions of the Act, in the event of inability or death of the owner of the single person company, the nominee shall take over the reins of the one person company

3. Social Recognition:

 As the One Person Company is registered under the Act, it enjoys the same value as of a Private Limited Company with increased trust and legal status.

4. Easy Credit facilities:

Legal status and automatic succession increases the popularity of One person Company among Banking and financial institutions to lend money.

5. Easy Annual return filing

 It is mandatory for One person Company to get its accounts audited and file annual returns. They can be made easily with the signature of its director; a company secretary signature is not mandatory.

The major disadvantages of OPC can be summarized as below:\

1. Tax Rate:

Being that the company is treated as a private company, the same tax slab is applicable and should have to pay 30% tax. Individual exemptions are not applicable.

2. Limited Growth:

A One Person Company would lose its status If the company’s turnover has crossed Rs.2 Crore.

3. One Company of Its kind:

A person can incorporate only One Person Company unless and until it loses the status. It would affect the serial business persons.