Why the freelancer Choose a One Person Company Registration in India
Freelancer is a person who works for themselves as freelance without accompanying the company or association. Sometimes, the freelancer takes the work of the company or organization as a contract and perform the contract ultimately self-employment. They deal the multiple clients at the same time. Operating as a freelancer, for all practical and personal reasons, is really just a business or a company where you are the sole owner. Hence, the legal entity “sole proprietor” matches to freelancers. But did you know that there is an alternative to a proprietorship model of business or a company? Can the One Person Company (OPC) concept be incorporated in India in Companies Act, 2013, and does it provide freelancers an alternative to being a ‘sole proprietor’?
Concept of One Person Company (OPC)
One person company is a types of companies which is introduced in Companies Act, 2013 and it make a revolution on history in India and the One person company has been implemented by the single owner. However, the turnover of this type of company is not exceed 2 crore rupees in three consecutive years and the paid up share capital does not exceed 50 lakh rupees for the same three years. if it exceeds, the company may be convert itself into a private limited company or a public limited company with respect to Companies Act, 2013. From the following short description you can understand the One Person Company (OPC) in India:
- An One Person Company (OPC) is a separate legal entity, which limited liability is completely separate from the sole member and provides protection of the sole members asset.
- An OPC has enjoys some tax benefits unlike private limited company and it has some tax exemptions.
Difference between freelancing and One Person Company
If you working as a freelancer, not having the necessity to register your firm or entity. It will be same as the sole proprietorship concept. If any losses occurs, you only take the responsibility of all the debts of your company in Sole proprietorship entity. But in One Person Company the liability of the sole member is limited and he does not loose any personal assets for the debts of the company. In this form of OPC, you have to register your entity in Register of Companies (ROC). Any freelancer wants to limits their liability, an One Person Company is the right choice to do your needs. OPC provides complete protection to the sole member. In Sole proprietorship, you have a unlimited liability. For any losses occurs, the sole member have to pay their personal asset to deal the debts.
if you wants to enlarge your business to the next step, there is no guarantee to getting the loan facilities. You have to prove certain things to the bankers and its somewhat difficult while comparing to an OPC. But, the One Person Company has some characteristics which can helps to get the loan proceedings easily. They are prospective fund rising and increasing business development characteristics. By this, you can easily get your loan processes than the sole proprietorship. Apart from that, One Person Company registration gives you a unique identity of your organization and place you as a separate company in Register of Companies (ROC). Not at all the personal loan, it will provides you a gold loan, securities loan, and getting credit cards easily. As a freelancer getting a loan is not an easy thing in current banking sectors. An OPC can design a route to get a loans easily for your business developments.
The One Person Company has the option to convert itself into a private limited company or a public limited company, when the annual turnover is increase as 2 crores rupees for three consecutive years. OPC can provides you a continuity to your business as in the same name. There is no other stoppages for your business growth. But in sole proprietorship, you have to drop the entity if turnover is increased. An OPC can provide more and more transparency to your business without dropping anywhere at any cause.
An OPC is not enjoys much more tax benefits while compared to private limited company. But compared to sole proprietorship, it is beneficial to every entrepreneur. Generally, an OPC must pay 30% of the taxes according to their turnover. It may be divided if the sole member nominates the dividend to their company. If the sole member nominates the dividend the profits also divided to that dividend. Meanwhile, the payment of taxes also reduced. But the freelancer or proprietor have to pay the taxes according to their profits. Approximately, it will be maximum of 30% tax rate including all charges. The freelancer have not to pay any amount as tax if they drop money from his business account. The slab rates only declared the tax payment of the freelancer or proprietor.
Winding up procedure
For a freelancer, the winding process is much easier than the One Person Company. The freelancer can close his business or organization at any time at any cause. There is no other legal formalities to do closing. But, in OPC it is not an easy task. The sole member of an OPC must give the letter about the winding up to the Register of Companies. The proper shut down is need for every OPC and it should take at least one month time period to complete all the legal procedure. As compared to OPC, a freelancer faces less risk in legal proceedings. Apart from this drawback, an OPC provides you a better platform to set your business goals and helps to achieve it easier. It will provides more and more funding benefits rather than the sole proprietorship to the freelancer.
If you want to better protection of your personal assets, definitely One Person Company is the right choice of every entrepreneur and the freelancer. It will guides to get better transparency, limited liability and routes you in success without losing your personal assets. Otherwise, perform your work as a freelancer itself.
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