Advantages and disadvantages of OPCs in India

April 5, 2025 Finance Talk Valli Sarvani

Starting a business in India has become more flexible with the introduction of the One-Person Company (OPC).

This structure allows a single entrepreneur to form a company with limited liability.

Here’s an overview of the key benefits and drawbacks of OPCs in India:

Advantages of an OPC

Limited Liability Protection

The most significant advantage of an OPC is limited liability. As per the Companies Act, the personal property of the owner is safe from the company’s creditors. The owner’s liability is confined to the unpaid subscription money.

Continuity of Business

An OPC can continue beyond the life of its owner. In case of the owner’s death or incapacity, a nominated person can take over, ensuring the business remains operational.

Market Credibility

Unlike sole proprietorships, an OPC has the status of a private limited company, which enhances its credibility in the market. This increased trust helps in building better relationships with clients and partners.

Easy Access to Credit

OPCs are viewed favourably by banks and financial institutions. The legal status and perpetual succession make it easier for OPCs to access loans and credit.

Simplified Compliance

While OPCs must file annual returns and have their accounts audited, the process is relatively simpler compared to private limited companies. The director’s signature is enough; a company secretary is not required.

Disadvantages of an OPC

High Taxation

OPCs are taxed at 30% on profits, similar to private limited companies. There are no tax exemptions, which can be a significant burden for small businesses.

Restriction on Growth

If an OPC’s turnover exceeds ₹2 crores for three consecutive years, it must convert into a private limited, public limited company, or LLP. This limits its scalability.

Limited to One OPC

An individual can only register one OPC at a time, which may limit serial entrepreneurs from pursuing multiple ventures under this structure.

OPCs offer limited liability and ease of operations, but the 30% tax rate and growth restrictions can be limiting factors for some entrepreneurs.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on January 26, 2017