Conversion of One Person Company into Private Limited Company

One-person Company is a relatively new term in India which is used for the businesses that are run by a single entrepreneur. OPC has become widely popular and it is promoted also to support new business enterprises. In the given article we will discuss about the reasons and methods of conversion of one-person company into private limited company (PLC).

There are basically two methods of converting an OPC to Private Limited Company which are voluntarily or by mandatorily. In any of the given cases an official process has to be followed for the conversion.
Eligibility for conversion:
An OPC can be converted to a Private Limited Company only if the following criteria are met strictly, which are:

• When the paid-up capital of the OPC exceeds Rs. 50 lakhs.
• When there is an average turnover for any three consecutive financial years of the company is more than Rs. 2 crores.

Mentioned below is a brief description of both the processes for a better understand of the people.

Voluntary Conversion

The process of conversion of Conversion of One Person Company into Private Limited Company voluntarily comes under the section 18 of the Companies Act. The process of conversion cannot be initiated till the completion of 2 years of the company as an OPC. Post that, the company can convert to a Private Limited Company which is under the same act, and it can be done by modification of MOA and AOA as per the provisions. After the conversion process, it is obligatory for the Private Limited Company to have a paid-up share capital of Rs. 50 lakh and also have an annual turnover of more than 2 crores.

Compulsory Conversion

This form of conversion takes place when an OPC has paid a capital of more than Rs. 50 lakhs or if the turnover of the company exceeds Rs. 2 crores. In the given conditions the company has to mandatorily convert itself to Private Limited Company.

Advantages of converting from OPC to Private Limited Company:

    

Easy Fund Raising

Private Limited Company have the opportunity to raise their shares by assistance from various investors, as getting funds/investments is the key for starting, sustaining and growing of any business.

Taxation Benefits

Private companies have been put under the bracket of 30% on total income but OPC is not recognized under the ITA, hence there are preferably more tax benefits by converting to Private Limited Company to prevent financial load.

 Improve Business Credibility

The credibility of a company is a very essential part of the company as it attracts reputed customers and assist in getting credit from dealers. With the information of Private Limited Company available on global database, it helps in validating the business and improving credibility of the business.

International Expansion

Private Limited Company are eligible for foreign direct investments of up to 100%, hence, foreign collaboration and investments can make the path of the company, being a multinational corporation, easier.

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