Introducing One Person Company – A recent legislation passed to ease out business formations for Start up Entrepreneurs.
Recently the Companies Bill was passed in the Parliament. Besides bringing out changes in the existing regulations and laws, it has introduced a new concept of forming a One Person Company. The concept is being welcomed by the start up entrepreneurs as an easy way to form a corporate form for business initiation.
Most of the experts are comparing the concept as the one superseding the Sole Proprietorship form of business formation. While both have their pros and cons, but in the long run and easing out regulations for start up companies, I think OPC will be preferred over sole proprietorship.
The Advantages of forming a One Person Company (OPC) includes:
1. It can be formed by a single shareholder/ single director.
2. It brings into existence a separate legal entity into place. It limits the liability of the members.
3. It is exempted from many procedural formalities that a private company is required to fulfil.
4. Unlike in sole proprietorship form, it enables raising capital from investors.
5. As and when the business operation increases, it can be converted into a Private Limited Company.
While the Disadvantages are limited to:
1. It is not easy to set up as sole proprietor is.
2. It leads to higher tax implication as tax would be charged at the same rate as charged to private limited companies. But in case of losses, it would be easy to carry forward and set off losses in the forthcoming years.
To know how to set up a One Person Company and further comparison with sole proprietor form, please follow the link to our blog: https://swanfintech.wordpress.com/category/opc/
Regards
Ujjwal Senani
Swan FinTech Private Limited
