Comparison Between OPC and LLP: Advantage of One Person Company
In India, the introduction of the One Person Company (OPC) and Limited Liability Partnership (LLP) has revolutionized the corporate landscape. Both structures provide limited liability to their members, but they differ significantly in terms of formation, governance, and tax benefits. In this blog, we will explore the differences between OPC and LLP and highlight the advantages of OPC.
Points of Difference Between OPC and LLP
| Point of Difference | One Person Company (OPC) | Limited Liability Partnership (LLP) |
|---|---|---|
| Applicability | Incorporated under the Companies Act 2013 | Incorporated under the Limited Liability Partnership Act 2008 |
| Registering Authority | Registrar of Companies (ROC) | Registrar of LLP |
| Number of Members | Only 1 member is required | Minimum 2 members, no maximum limit |
| Minimum Capital | No minimum capital required after 2015 amendment | No specific minimum paid-up capital |
| Compliances | Higher statutory compliance cost | Lower statutory compliance cost |
| Penalty on Non-Compliance | Up to 1 Lakh | Up to 5 Lakh |
| Audit Requirements | Mandatory audit | Audit required only when turnover exceeds Rs 40 Lakhs or capital contribution exceeds Rs 25 Lakhs |
| Conversion | Can be converted to Private Limited Company after 2 years | No conversion option available |
| Taxation Benefit | Wealth tax applies, and there is no uniformity in Minimum Alternate Tax | No wealth tax, uniform Minimum Alternate Tax rates |
| Inheritance of Entity | Requires a nominee for succession | Perpetual succession, independent of partners |
While both OPC and LLP offer limited liability protection, OPC is better suited for solo entrepreneurs who want to maintain control over the company, while LLP is ideal for businesses with multiple partners. Both structures provide legal protection to their members, ensuring their personal assets are not at risk.
Advantages of One Person Company (OPC)
The One Person Company (OPC) is a modern form of a private limited company that allows an individual entrepreneur to run their business while enjoying the benefits of limited liability. With the amendment in 2015, OPCs can now be incorporated without a minimum capital requirement, making it more accessible for small business owners and startups.
The major advantage of OPC over other business structures is that it allows full control to the sole member, eliminating the need for a second partner or director, as was required in traditional private companies. Additionally, OPC offers the benefits of being a registered company under the Companies Act, with the credibility and legal recognition that comes with it.
OPC allows an individual entrepreneur to experience the advantages of a company without the burden of involving multiple partners.
Conclusion
In conclusion, both OPC and LLP are great business structures, but each has its own unique advantages depending on the business needs. OPC is perfect for solo entrepreneurs looking for limited liability protection, while LLP is better for businesses that require flexibility and multiple partners.
