PRIVATE COMPANY OR ONE PERSON COMPANY WHICH IS BETTER FOR START-UP

Start-up is a state of mind. Start-up as new company is small and initially financed and operated by one or more investor or more. Entrepreneurs should lay down basic business structure to moves from idea stage to securing finance. A start-up is a company working to solve a problem where the solution is not obvious and success is not guaranteed.

Private company is the ultimate form of business, owners can do any type of complex business transaction as they like. Forming a private limited company results in protection of personal assets, access to more resources, financial assistance and greater credibility.

OPC is a refined form of proprietorship. Entrepreneur who wishes to run business individually opt to start an OPC. OPC enjoys all the benefits of a normal limited liability company. OPC is therefore a viable option for those looking to start an unregistered Proprietorship.

Private Company or One Person Company (OPC) which is better let’s go through each and every aspects:

At initial stage entrepreneurs must be aware of all the legal boundaries of business and features of the various legal structures of private limited company and OPC.

INVESTORS IN THE INITIAL STAGE

Most start-ups begin with the futuristic plan to have ‘Return on Investment’. Investors invest in Private Limited Companies in lieu of some stake which one cannot get in an OPC.

GOING PUBLIC IN FUTURE

In Private Limited companies, one can go public by converting Private limited into Public limited company, but OPC in the initial stage of the start-up is the single owner of the company, and later be converted into a Private Limited with the introduction of new persons in the company.

SHAREHOLDING

100% of the shareholding lies in the hand of single owner as in case of OPC, whereas, same cannot happen in Private Limited Company as there must be two or more directors.

TAX ADVANTAGES

Taxes are to be paid at a flat rate of 30% on profits both in Private Company and OPC. There are some industry-specific advantages, to the private company but not to OPC.

LIMITATIONS

If an annual sale turnover of OPC exceeds INR 2 crores or paid up capital exceeds INR 50 lakhs, it’s mandatory to convert OPC to Private Limited Company but in case of Private Limited Company there is no such limitation and conversion requirement.

NRI OR FOREIGN NATIONALS

In case of OPC only Indian Nationals are allowed to start a OPC, whereas, Private Limited Company can be managed and owned by NRI & Foreign Nationals. 100% FDI is available to Private Limited.

COST OF STARTING-UP

Now the costs of starting a private limited company are manageable as minimum paid-up capital requirement to incorporate Private Limited Company has been removed. Government fees work out to around Rs. 7,500, while professional fees are around Rs. 7,000. In case of OPC initial cost to start are very low. Government fees work out to around Rs. 7,000, while professional fees are around Rs. 6,000.

CONCLUSION

Choosing the best form of business is as important as the execution of the idea. The first preference for start-ups is to form a private limited company because in all probability they have to raise funding by diluting their equity in future and it is difficult in other case to start-up to convince its investor to invest. In the coming era OPC is a popular form of venture for start-ups.

Advertisements