Advantages and Disadvantages of an OPC that you need to know

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OPC has become one of the most preferred forms of Business registration amongst entrepreneurs. If you are planning to get your Business registered as an OPC, you must understand its advantages and disadvantages first.

In this blog, I will be covering all the significant advantages and disadvantages of an LLP. But before you start, if you need some more information, you can visit here and check out the detailed information on an OPC registration.

Now let’s get started.

What are the advantages of an OPC?

  • Single Ownership

OPC is a perfect option for those who want to start their Business single-handedly but with minimum compliance. As the Owner is a single individual, the decision-making process is quick and efficient.

There remains no need for approvals from other members when there is a time-constrain.

  • Limited Liabilities

An OPC is a form of registered Company. So the liabilities of the Owner are limited. The private assets of the Owner in standard cases stay immune. If the Business defaults or fails to pay any outstanding debts, the debtors cannot utilize the Owner’s private assets to clear the debts.

This gives the Owner of an OPC.

  • Minimal Compliance Burden

An OPC is incorporated under section 2 (68) of the Companies Act 2013. This is at ar with the Private Limited Company. So an OPC will have to follow all the compliances necessary for a Private Limited Company.

Still, some relaxations are offered to the OPC, making the compliance less complex than a Private Limited Company.

  • Easy funding

Raising funds for an OPC is extremely easy as compared to a Proprietorship firm. Banks and other NBFCs prefer OPCs over PArtnerhsip & Proprietorship firms. If you plan to start a business that demands a considerable sum, prefer the OPC registration over others.

  • Perpetual Succession

OPC is a registered Business entity that has a separate legal existence in the eyes of the law. This means it enjoys the benefit of Perpetual Succession. This means, if anything happens to the Owner, the Business can continue as usual.

  • No mandatory AGMs (Annual General Meetings)

As per the law, every Private Limited Company has to hold an AGM. But for OPCs, this process is not mandatory. A member from the Organization can convey the resolution to other members. The entry about this resolution in the minute book, accompanied by the member’s signature, will be treated as an AGM.

This gives much-needed flexibility to the single Owner, who manages all other crucial tasks in the OPC by himself/herself.

  • Board meeting

For an OPC, the Board of Directors has to meet just once every 6 months. And the consecutive meetings should have a gap of a minimum of 90 days. Here, too, the compliance for an OPC is simple compared to a Private Limited Company.

What are the Disadvantages of an OPC?

  • Not for High-turnover Businesses

The law mandates that if the paid-up share capital of an OPC is above 50 lakh or its annual turnover is above 2 crores, then it is mandatory to convert such an OPC into a Private Limited Company.

So if you are planning to start a business that will have considerably higher turnover, it is advisable to go directly to a Private Limited Company.

  • Higher Tax Bracket

As a registered Company, OPC falls in the higher tax bracket. The current Income tax rate for an OPC is 30%, which is considerably higher than the Income Tax Rate of Propreitory firms.

The tax slabs vary from 10% to 30% in Proprietary firms, depending on your income as a Propretor. So if you are planning to save tax on your income, it is better to avoid the OPC registration.

  • Only one OPC incorporation

As per the Company’s Act 2013, an individual can register only one OPC. If you are planning to start another business, you are not allowed to register it as an OPC.

This can be a cause of significant concern for some Business owners who generally run more than one Business to cope with the changing business environment globally.

  • Single-Administration

Business is complex. Every day you face a new challenge. It is possible that you might not have a solution to every problem. But when you register your Business as an OPC, you cannot have insight from other members or partners.

You alone will have to manage all the Business operations & challenges. This can prove challenging, especially under challenging circumstances.

  • Inclusion of OPC in the name

Just like a Private Limited Company, a One Person Company has to include the suffix OPC in the name. Some Businesses and individuals place lesser faith in OPC as a single owner manages them. The reason is all the decisions related to OPC are taken by a single person, increasing the risk of a wrong move.

Conclusive thoughts

Ultimately, it’s your Business goal and Business that drives the selection of a Business structure. Remember, no Business structure is ideal. Every one of them has some flaws. But the decision you make will impact your Business a lot. So it’s better to take advice from the expert before you take a step further.

For any further details on the Business registration, get in touch with our experts today.

Global Consulting Group is a leading Taxation, Accounting, and Compliance firm that helps individuals, MSMEs, and other businesses manage their accounting, taxation regulatory compliance affordably.

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