In this blog we will learn all about benefits and drawbacks of One Person Company if we want to start a business then we have to register for a company, Hence you have to do Company Registration. And there are many types of companies such as Proprietorship, Partnership, Private Limited Company, etc.
Anyone person can also register for a company and can take benefits of the Private Limited Company. So here we will discuss the benefits and drawbacks of One Person Company.
#Introduction to One person Company
The One Person Company is also a company that was introduced under the Companies Act 2013. As the name suggests, there is only one shareholder in the One Person Company. The Owner of the One Person Company is the one and only shareholder of the company.
A long time ago, when anyone wanted to establish a business with a single person company, he had only one option: a Proprietorship firm where he can work alone as a proprietor. The major drawback of the proprietorship firm was the unlimited liability where the proprietor had to pay the money by selling his own personal things.
Hence in the proprietorship firm, the business liabilities become the personal liabilities. For understanding in depth here is an example, If you take a loan from the bank as a proprietor and by chance, you are not able to pay the mortgage, then the bank can take the money by selling your assets. The number of liabilities that you have becomes the personal liabilities in Proprietorship firm. So to avoid the drawback of unlimited liability, the concept of One Person Company was introduced.
The One Person Company can be said as a concept between the Proprietorship and Private Limited Company. The benefits of Private Limited Company and the flexibility of the Proprietorship firm is given in One Person Company.
#Who has the right to register for a One Person Company?
The person registering for a One Person Company must be a citizen of India, and the nominee should be a resident of India. If you want to start a small business on your own, then the One Person Company is the best option for you.
#Benefits of One Person Company
Liabilities are Limited:-
Here, the personal liabilities do not become the personal liabilities, and the bank cannot touch your personal assets for the recovery of the loan taken by your company. You can take the loan under the name of the company, and credit history is also made under the name of the company.
Lesser Compliance's
The One Person Company has fewer compliance's compared to the other companies such as proprietorship and private limited company.
Minimum Obstacles for Initiation
You can initiate the One Person Company as soon as possible as a sole entrepreneur as you don’t need any other shareholder to start the company.
You can convert the One Person Company into Private Limited Company
If you want to take venture funding or raise money from the investors, you can do it by converting your company into the Private Limited Company.
#Drawbacks of One Person Company
Maximum One shareholder
There can be only one shareholder allowed in the One Person Company. Hence if you want to raise funds from the investors, you have first to convert your company into Private Limited Company.
Cannot Issue Employee Stock Options
The employees of the company are not allowed to take shares of the company as there is only one permitted shareholder for One Person Company.
.jpg)
