A One Person Company (OPC) and a Private Limited are different business entities that are governed under the Companies Act 2013. A One Person Company is to cater to excited entrepreneurs who want to make a name for yourself on their own in the business world. On the other hand, if you want to establish yourself along side a partner, you can choose a private limited company.
So, what’s your preference? Do you want to start your business as a One Person Company or a Private Limited Company more your cup of tea? This article is going to help you make a choice be revealing to you the difference between one person company and a private limited company.
Let’s discuss the definition of each of them
To make a choice between OPC vs Pvt ltd Company, it’s always better to start by knowing their definition.
Let’s talk OPC or One Person Company
In a one-person company, there is only one person as the member. And, there is only one shareholder and one director. Simply put, only a single individual can play all those roles.
Thus, if you’re someone who is enthusiastic enough to take all the tasks on your shoulders, no one is going to stop you from choosing one person company.
Let’s talk Private Limited company
A private limited company can only be started or incorporated if there are at least 2 directors, 2 members and 2 shareholders of the company. Remember, two individuals can play all these roles. Thus, a private limited company needs two heads. Additionally, the liability of these members is limited to the amount of money they have invested in their shares.
How is an OPC similar to a one-person company?
Let’s now talk about the similarities between an OPC and a Pvt Ltd Company
- They both are separate legal entities. Their identities are different from their directors
- They both can earn tax benefits
- They both have the perk of limited liability.
- The registration process to incorporate an OPC and a Private Limited Company is practically the same.
So, if everything is the same, can a private limited company be owned by one person? Absolutely not; as we have said, you need at least two people to direct a Private limited company. However, if you want to convert your one-person company into a private limited company, you can do so. But the condition is you’d have to add another member.
Also read about: Procedure for close LLP
Differences between private limited company and a one-person company
Let’s now talk about the differences between the two in a clear manner:
- Members required:
- OPC: One individual can run the whole show
- Private Limited Company: At least two people are required
- Directors required:
- OPC: Minimum 1 and maximum 15 directors can be involved
- Private Limited Company: Minimum 2 and maximum 15 directors can be involved
- Board meeting
- OPC: A One-person company has to conduct one meeting after every six months.
- Private Limited Company: A private limited company is required to hold one meeting after every four months
- Foreign Direct Investment:
- OPC: A One Person Company is not eligible for foreign direct investment
- Private Limited Company: This business entity is eligible fr FDI
- Which one is suited to whom?
- One Person company: Chose if your capital requirement is less than 50 lakh and annual turnover is less than INR 2 Crore
- Private Limited Company: Anyone can choose a private limited company
Now that you know the difference between the two, which one would you choose?
Also read about annual compliance for private limited company