Introduction
One Person Company (OPC) and Private Limited Company are two popular forms of business entities that operate under the regulations of the Companies Act.
Each structure has unique features and benefits, making it crucial for aspiring entrepreneurs to understand their differences before choosing the most suitable option for their business.
This article aims to provide a comprehensive comparison between One Person Company and a Private Limited Company, highlighting their distinct characteristics, legal requirements, ownership structures, and other essential factors.
Similarities between an OPC and a Private Limited Company
Here are the similarities between an OPC and a Private Limited Company:
- Governing Law: Both OPC and Private Companies are governed by the Companies Act 2013.
- Registration Process: Both entities must be registered with the Ministry of Corporate Affairs.
- Limited Liability: OPC and Private Limited Companies provide limited liability protection to their owners/shareholders.
- Legality: OPC and Private Limited Companies are separate legal entities, and the personal assets of their owners/shareholders are not liable for the Company’s losses.
- Taxability: Both entities are subject to the same tax rates as per the provisions of the Income Tax Act.
- Audit: Both OPC and Private Companies are required to appoint auditors within 30 days of incorporation for statutory audits, regardless of their share capital or turnover
Differences between OPC and a Private Limited Company
The differences Between OPC and a Private Company are listed as follows:
- Name of entity: OPCs have to use the suffix “(OPC)” in their company name, while Private Limited Companies use the suffix “Private Limited” or “Private Limited Company.”
- Minimum Capital Required: OPCs do not have a mandatory minimum paid-up capital requirement, but if the paid-up Capital exceeds Rs. 50 lakh, the OPC must convert into a Private Limited Company. Private Limited Companies no longer have a minimum capital requirement.
- Minimum Number of Members: OPCs can have a minimum of one member and a maximum of one member, while Private Limited Companies require a minimum of two members and can have a maximum of 200 members.
- Minimum Number of Directors: OPCs can start with at least one Director, while Private Limited Companies require a minimum of two. Both entities can have a maximum of 15 directors.
- Conversion: An OPC can be converted into a Private Limited Company after two years of incorporation or when its turnover exceeds the threshold limit.
- Annual Filings: OPCs need to file financial statements and annual returns with the Registrar of Companies (ROC), while Private Limited Companies need to file annual accounts and returns with the ROC.
- Transferability of Shares: In an OPC, shares can only be transferred by altering the Memorandum of Association, while in a Private Limited Company, shares can be easily transferred.
- Board Meetings: OPCs must hold a board meeting every half-year, with a 90-day gap between them. If there is only one Director, no board meeting is required. Each quarter of the calendar year, private limited companies must hold a board meeting, with a maximum gap of 120 days between meetings.
Comparison between OPC and Private Limited Companies
Cost of Registration
One Person Company’s registration cost is lower than that of a Private Limited Company.
The all-inclusive cost for registration of a One Person Company is Rs.10,000/- to Rs.15,000/- while the all-inclusive cost for registration of a Private Limited Company is Rs.15,000/- to Rs.25,000/-.
Post Incorporation
One Person Company has been recently introduced in India. Still, some Governmental Departments and Banks have not updated their systems or forms and procedures to handle Person Companies. Therefore, there may be difficulties in obtaining specific licenses or registration after the incorporation of a One Person Company.
A Private Limited Company has been around for decades and is India’s most popular type of corporate entity. Therefore, obtaining other licenses and registration post incorporation of a private limited company will be easy.
To facilitate better comprehension, we have presented a comparative analysis of One Person Companies (OPC) and Private Limited Companies in tabular form.
Comparison Table: One Person Company (OPC) vs. Private Limited Company
| PARAMETER |
ONE-PERSON COMPANY |
PRIVATE LIMITED COMPANY |
| Recommended for |
Individual Proprietor |
Multiple Promoters |
| Minimum owners |
1 Owner & 1 Nominee |
2 Shareholders |
| Maximum owners |
1 Owner |
200 Shareholders |
| Board of directors |
At least 1 Director |
At least 2 Directors |
| Shareholding |
100% shares held by a single person |
A single person cannot hold 100% shares. Minimum of two shareholders required |
| External investment |
Difficult to obtain |
Easily available |
| Credibility |
Low |
High |
| Compliance requirements |
Annual return filing. No board meetings if only one Director & no general meetings. |
Annual return filing, board meetings & general meetings |
| NRI or foreign nationals |
Only Indian citizens and Indian residents are allowed to start |
The Company can also be created and managed by NRIs or foreign nationals |
| 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 |
No mandatory conversion |
| Procedure |
Obtain DSC (digital signature certificate), obtain DIN (directors identification number), name approval, file for incorporation & file nominee details. |
Obtain DSC (digital signature certificate), obtain DIN (directors’ identification number), name approval & file for incorporation. |
| Law applicable |
Companies Act 2013 |
Companies Act 2013 |
| Minimum share capital |
No minimum share capital is necessary. If Capital exceeds 50 lakhs, OPC becomes a Private Limited Company. |
No requirement for minimum share capital |
| Board meeting |
Every half-year, there will be a meeting. There must be a 90-day gap between the two meetings. |
Meetings are held every quarter. The maximum gap between the two meetings can be 120 days. |
| Statutory audit |
Compulsory |
Compulsory |
| Annual filing |
Financial statements and annual returns are to be filed with the registrar |
Annual accounts and annual returns are to be filed with RoC |
| Liability |
Limited |
Limited |
| Transferability of shares |
Can be made by altering MOA |
It can be easily transferred |
| Foreign direct investment |
Not eligible for FDI |
Eligible via automatic route |
| Suitable for |
Individuals with capital requirements under 50 lakhs and turnover less than two crores |
Business, trade, manufacturers, large industrial establishments |
| Company name |
Should end with (OPC) Private Limited Company./(OPC) Ltd. |
It should end with a Private Limited Company. |
Frequently Asked Questions
One Person Company is a relatively new form of business entity. A private limited company can be formed with a minimum of two directors and shareholders. The directors and shareholders can be the same individuals however, One person company has no requirement of minimum two shareholders. It allows a single entrepreneur/person to get his business registered as a company and get limited liability protection.
Yes. You can appoint your husband/wife as a nominee, provided that he or she holds a PAN in his or her name.
Yes. A nominee can be changed at any time with due intimation to the Registrar.
In case the paid-up share capital of an OPC exceeds 50 lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into a private or public company.
DIN is allotted by the Central Government to any person intending to be a Director of a company. It is an 8-digit unique identification number which has lifetime validity. DIN is specific to a person, which means even if he is a director in 2 or more companies, he has to obtain only 1 DIN.
Whenever a return, an application, or any information related to a company will be submitted under any law, the director signing such return, application or information will mention his DIN underneath his signature.
