One of the biggest disadvantages of registering a company is that the owners of one person companies cannot incorporate or register another one person company and their nominees cannot become nominees in another one person company.
- B) ) Maximum Turnover and Capital Limit
As per Rule 6 of Company (Incorporation) Rules, 2014
(a) A One Person Company cannot remain a One Person Company if its paid-up share capital exceeds Rs 50 lakh (fifty lakh rupees) and its average annual turnover exceeds Rs 2 crore (two crore rupees).
How average annual turnover is calculated ?
A three-year average of annual turnover is calculated.
It is impossible for OPC to continue doing business if either of the above conditions is fulfilled.
(2) The One Person Company shall convert itself, within six months of its paid-up share capital exceeding fifty lakh rupees or the end of the relevant period during which its average annual turnover exceeds two crore rupees, into either a private company with a minimum of two members and two directors or a public company with a minimum of seven members and three directors.
In a one-person firm, there is a great deal of restriction on expansion.
One Person Company or any officer of the One Person Company who violates these rules shall be fined up to ten thousand rupees and for each subsequent day of the violation a further fine of one thousand rupees will be imposed.
Most people believe that registering a one-person company is less expensive than registering a private limited company. However, that isn’t the case. The registration of a one-person company requires two people (the owner and the nominee), as opposed to the registration of a private limited company, which requires at least two people. Fees and stamp duty will vary depending on the amount of authorized capital. Companies, whether they are OPCs or private limited companies, must register and pay stamp duties.
One difference between OPC and private companies is that OPC requires only one director’s digital signature certificate, whereas private companies require two.
- D) The compliance rate of a person company after registration is lower than that of a private limited company. Nevertheless, this is a myth. There is no difference in compliance between one-person companies and private limited companies.
A one person company is also required:
- to file Income Tax return (ITR)
- to file annual return with Registrar of companies (ROC)
- to get its account audited by the chartered accountant in practice.
- to file its GST returns
- to file its TDS Returns etc.
As far as post-registration compliance is concerned, there is no difference.
Due to the fact that a one-person company can’t issue shares or divide ownership, it cannot attract investors. A private limited company, on the other hand, can have no more than 200 members. By offering shares, a private limited company can attract investors. There is no other way for one-person companies to raise funds than to take out loans. Lenders prefer to lend to limited companies over sole proprietorships.
(OPC) Private Limited is the name given to one person companies. As a result of using ‘OPC,’ instead of increasing value, it actually decreases it. When someone sees the name OPC, they tend to think of it as a low-potential company. One-man companies have a lower reputation in the industry than private limited companies.
It was discussed that one-person companies have a number of disadvantages, such as registration, compliance, finance, expansion, and reputation.
Consequently, if you are planning to form a company, you should consider forming a private limited company rather than a one-person LLC since the registration and compliance costs are similar.
- Steps for Conversion of Private Limited Company Into OPC
- How to register a one-person company
- One Person Company Advantages