8 Key Differences Between OPC and Private Limited Companies
Table of Contents
Introduction
The Companies Act regulates two prevalent business entities: private limited and one-person companies (OPC). Before selecting the most appropriate option for their business, aspiring entrepreneurs must comprehend the distinctions between each structure and its distinctive features and advantages.
The objective of this article is to offer a thorough comparison of OPC and Private Limited Companies, emphasising their unique characteristics, legal requirements, ownership structures, and other critical factors.
What is the definition of a one-person company(OPC)?
In the previous Companies Act 1956, a private limited company was required to have a minimum of two directors and shareholders. Nevertheless, the Companies Act 2013 has enabled establishing a company with a single director and one member.
A One Person Company (OPC) is a business entity that a single individual owns despite having a distinct existence.The One Person Company is a hybrid of the sole proprietorship and Company business forms.
The concept has opened up many opportunities for solitary proprietors and individual entrepreneurs, who can capitalize on the benefits of corporatization and limited liability.
What is a private limited company?
A private limited company is a distinct entity from its shareholders or directors. A minimum of two shareholders is required to establish a private limited company. A private limited company can have a minimum of two shareholders and a maximum of up to 200 shareholders.
Corporations, including foreign corporations or natural persons, may serve as shareholders. Private limited companies may also be divided into two categories: private limited companies limited by shares and private limited companies limited by guarantee.
The shareholders of a private limited company are subject to limited liability. In the event of the Company’s liquidation, the shareholders’ personal assets are not at risk.
Similarities Between OPC and Pvt. Ltd. Co.
| Aspect | One Person Company (OPC) | Private Limited Company (Pvt. Ltd. Co.) |
| Legal Entity | Regarded as a distinct entity in the eyes of the law | Regarded as a distinct entity in the eyes of the law |
| Tax Advantages | Tax benefits calculated as 25% of the profits | Tax benefits calculated as 25% of the profits |
| Limited Liability | Sole proprietor subject to limited liability to the extent of their shares | Shareholders subject to limited liability to the extent of their shares |
| Registration Process | Mandated by the Ministry of Corporate Affairs | Mandated by the Ministry of Corporate Affairs |
The Distinction Between a Private Limited Company and a One-Person
| Aspect | One Person Company (OPC) | Private Limited Company (Pvt. Ltd. Co.) |
| Entity’s Name | Must have the suffix (OPC). Typically established as OPC Pvt. Ltd. or OPC Private Limited. | Must conclude with the suffix “private limited.” |
| Minimum Capital Requirement | No mandatory minimal paid-up capital. Must convert to Pvt. Ltd. if paid-up capital exceeds Rs. 50 lakh. | No mandatory minimal paid-up capital due to the Companies Amendment Act of 2015. |
| Minimum Number of Members | Minimum and maximum of 1 member. | Minimum of 2 members and maximum of 200 members. |
| Minimum Number of Directors | Minimum of 1 director. Maximum of 15. | Minimum of 2 directors. Maximum of 15. |
| Conversion | Can be converted to Pvt. Ltd. after two years or if turnover exceeds the threshold limit. | N/A |
| Annual Reports | Registrar files financial statements and annual returns. | ROC files annual accounts and annual returns. |
| Transferability of Securities | Shares can be transferred only by modifying the Memorandum of Association. | Shares can be transferred effortlessly. |
| Board Meeting | Must hold a board meeting each half of the calendar year, with a minimum of 90 days between sessions. Not required if only one director. | Must conduct one board meeting each quarter, with a maximum interval of 120 days between sessions. |
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