Benefits of One Person Company in India
Benefits of One Person Company in India
The draft Companies Bill, 2009 introduces the concept of One Person Companies (OPC). It allows a single person to form a company and get incorporated under section 2(62) of the Companies Act 2013. This is an excellent step towards simplifying the process of forming a Company for small entrepreneurs.
Earlier a minimum of two members were required to be included in the company and this increased compliance burden on the entrepreneur. As a result, most small businesses were run under proprietorship model which is a non-legally recognized entity and does not have the benefits of limited liability or a separate legal entity.
One Person Company provides the entrepreneur with limited liability, a legal status and social recognition. It also gives a sense of confidence to the suppliers and customers. Similarly, big organizations prefer to deal with a private limited company rather than a proprietorship firm.
It is easier to obtain loans from the banks and financial institutions if a company is registered as a legal entity. This is because the bank will be able to assess the credit worthiness of a company and give a loan without any hassles.
Another advantage of incorporating an OPC is that the owner gets a lot of tax benefits like directors' remuneration, rent, interest and so on which are not available in case of a sole proprietorship. These are allowed as deductions from the total profits made by the company, thus lowering the Tax Liabilities of the owner.
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