One-person company is an excellent model for solo entrepreneurs who are looking beyond the prospects provided by a sole proprietorship.
It provides full control of the company to a solo promoter and also limits his/her liabilities contribution to the business. This solo promoter will be the only director and shareholder. A nominee director is also there but he does not have any power until the presence of the original director. It does not have any chances of raising equity funding or offering stock options to employees. If an OPC maintains an average turnover of over Rs. 2 crores for 3 years or has a paid-up capital of over Rs. 50 lakhs, it need to be registered as private limited company or public limited company within six months.
On growing businesses need to lend money frequently. Proprietor has the personal liability for all this debt in the Sole Proprietorship. So, in case of non-payment of debt by the business, the Proprietor made to pay this debt by selling his personal assets. In an OPC, personal assets of the proprietor are safe and only the amount invested in starting the business will be lost under any circumstances.
In a Sole Proprietorship, the business would come to an end after the death of his promoter. Whereas, an OPC has a separate legal identity and it will be passed on to the nominee director and hence, its existence will be continued.
Annual filings are reduced to a great extent because an OPC can have only one director and a shareholder. Work related to share certificates and the statutory registers is also reduced.