Once you start with a business, you always concern about the structure of the business. At the initial stage of the business, most of the people end up with a question that is whether OPC or LLP.
Let’s understand each and everything about both these two structures i.e. LLP and OPC in detail and at the end of this article you will surely find the appropriate structure for your business.
One Person Company (OPC)
The entrepreneurs who are looking forward to form a company with limited liability should register for OPC. An OPC is exclusively for those who are willing to take one step ahead to run their business in more effective and efficient manner with an intention to become a legal entity in the eyes of law.
One Person Company is the only company which has only one shareholder as its member. The concept of One Person Company encourages single and enthusiastic entrepreneurs to operate their own venture.
According to Rule 3 of the Companies (Incorporation) Rules 2014 say, only a natural person who is an Indian citizen and resident in India can incorporate a One Person Company. Even a nominee for OPC shall be a Indian resident.
An OPC can be registered with a minimum capital of Rs 1 lakh only. But if the paid-up capital exceeds Rs. 50 lakhs, then the OPC has to be converted into a private limited company. The LLP will also convert into a private company when the OPC’s average turnover for 3 consecutive years exceeds Rs 2 crore.
Limited Liability Partnership (LLP)
If you are running a business with partners, then LLP is the best option for your business. An LLP is a combination of partnership firm and company.
In LLP form, partners can run a business under the roof of limited liability. The liability of partners is limited as much as their contribution.
An LLP works best for startups and small businesses that are run by partners and want to have the nominal regulatory compliance.Incorporation of an LLP is also cheaper and easier to get.
Comparison between OPC and LLP
The below table will briefly explain you about OPC and LLP and its requirements;
| Particulars | OPC | Limited Liability Partnership |
|---|---|---|
| Law Applicable | Companies Act 2013 | Limited Liability Partnership Act, 2008 |
| Minimum share capital | No requirement for minimum share capital. If capital exceeds 50 lakhs, OPC gets converted to Pvt. Ltd. | No requirement for minimum share capital |
| Members Required | Minimum one | Minimum 2 |
| Maximum one | Maximum No limit | |
| Directors required | Minimum one | Two designated partners |
| Maximum 15 | Maximum not applicable | |
| Board meeting | One meeting in each half of the year. The gap between the two meetings must be at least 90 days | Not necessary |
| Statutory Audit | Compulsory | Not compulsory unless partner’s contribution exceeds 25 lakhs or annual turnover exceeds 40 lakhs |
| Annual Filing | Financial Statements and Annual returns to be filed with registrar | Annual accounts and Annual returns to be filed with RoC |
| Liability | Limited | Limited |
| Transfer-ability of shares | Can be made by altering MOA | Can be transferred by executing agreement before a notary public |
| Foreign Direct Investment | Not eligible for FDI | Eligible via automatic route |
| Suitable to which type | Individuals whose capital requirements is less than 50 lakhs and turnover is less than 2 crs. | startups , Business, trade, manufacturers etc. |
| Company Name | Should end with (OPC) Pvt. Ltd./ (OPC) Ltd. | Should end with LLP |
| Nominee | Not required | One Nominee is required |
| Distribution of Profit | Profit is exempt in the hands of Partners | Profit is exempt in the hands of Partners |
| No tax is to be paid on the distribution of profit by the LLP | OPC Private Company has to pay dividend distribution tax on dividend. | |
| Dissolution | LLP liquidator is appointed to file the copy of the order to Tribunal with the registrar for LLP’s winding up | Where the individual shareholder is not active and NOC is to be obtained from the creditors before winding up of OPC |
Conclusion
Even after having many similarities between OPC and LLP they both have different characteristics. OPC is specifically for individual entrepreneur who is looking forward to take his business once step ahead and LLP is mostly for the efficient team who is running startups.