Disadvantages of One Person Company (OPC) Registration
Nothing in this world comes without demerits; hence the following are the disadvantages of OPC Registration which are as follows-
1. High Tax Rate
In Sole proprietary, you are required to pay the tax according to your salary with the prescribed tax slab rate like 10%, 20% or 30%. But in the case of OPC Registration, the tax will charge at the 30% income tax. The high tax rate is a big disadvantage to open person company registration.
2. Compliance Cost
Compliance cost of partnership firm or proprietary is very less as compared to One Person Company.
3. OPC is included in Name
You are needed to especially specify the one person company in your company name in the bracket.
4. Only One Person Management
A shareholder is one and all that take all the Decisions. The Company’s success and growth are in the hands of one person’s decision-making capabilities and knowledge.
5. OPC Incorporation is allowed
You can incorporate only one OPC. In the mean time if you want to start another OPC then it is not allowed.
6. Not suitable for high turnover
In the event that you want to have a growth in high turnover of your business or you have effectively high turnover, then it will be a wise choice if you build up a private limited company rather than One Person Company.
OPC Registration Fees
The OPC Registration fee varies from company to company. Some company charges high and some are corpbiz the pocket friendly.
Capital Requirement for One person Company Registration
The OPC can have an average turnover of Rs 2 Crores for 3 years if the turnover exceeds the limit then it comes under the mandatory criteria for conversion.
Difference between Sole proprietorship and OPC
|Types of Company (Basis)
||One Person Company Registration
||It can be registered under MCA and Companies Act 2013
||Not considered as a separate legal entity
||Separate Legal Entity
||Limited to the extent
|Minimum Number of member
||Minimum number of person
|Maximum number of Members
||Maximum of One person
||Maximum of two person
||Allowed if one is the director and the other is the nominee. Both the director and the nominee cannot be foreign citizen
||Allowed to one person only
||Comes to an end on death or retirement of the member
||Existence is independent of director or nominee
||Tax will be charged as an individual
||Tax rate is 30% on the profit plus cess and surcharge
||Income tax returns with the registrar of the company
||Filed with the registrar of the company
Mandatory Conversion of an OPC to a Private Limited Company
The following are the factor that comes under mandatory conversion of One Person Company to Private Limited Company-
- When the increase in the paid-up capital of a One person Company goes beyond rupees 50 lakh and ,
- When an increase of average annual turnover during the period of immediately preceding 3 consecutive financial years is beyond rupees 2 crores.
In the above scenario, one person company is required to convert itself into either or private or a public Company within a period of 6 months.
Voluntarily Conversion of an OPC to Private Limited Company
The Following are the factors where voluntarily Conversion of an OPC to Private Limited Company is made:-
- When a One Person Company gets incorporated, it cannot voluntarily convert itself to the private or public company before 2 years from the date of incorporations.
- If in case the time period has elapsed and 2 years time period is over, a One person company can then apply for conversion to private or public limited company.
Furthermore, the conversion process should be done as per the rules and regulations laid done by the Companies act, 2013 under the section18 and rule 7(4) of the Companies (Incorporation) Rules,2014.
Registering one person company is quite an easy task but it requires professional guidance too. We at corpbiz provides the best professional team for your back.