One Person Company (OPC)
One Person Company Registration
Introduction
In India, a one-person company is a radical idea that was introduced with the Company Act of 2013. A single individual could not form a business prior to the implementation of the Companies Act 2013. In India, a single person can form a one-person company. An OPC combines the advantages of a corporation with those of a single proprietorship. Previously, if someone wanted to start a business, they could only do so as a single proprietorship.
A company can be founded with just one director and one member, according to Section 2 (62) of the Company's Act 2013. In India, a one-person company is a sort of entity with fewer compliance obligations than a corporation.
Under the Companies Act 2013, a one-person company can be registered in India with just one member and one director. It is also acceptable for the Director and a member to be the same individual. An individual can register an OPC in India whether they are a resident or non-resident Indian.
Table of Contents
Eligibility Checklist
Benefits of One Person Company
One person company is the corporatization of a sole proprietorship, therefore it has all of the privileges that a corporation does, as well as some relaxations in company law. Mentioned below are some of the advantages/benefits of a one-person company.
● Compliance Burden
The definition of "Private Limited Company" mentioned under section 2(68) of the Companies Act, 2013 includes a one-person company. As a result, an OPC will be compelled to follow the same rules as private corporations. OPCs, on the other hand, has been granted a variety of exemptions, resulting in a decreased compliance burden.
● The sector of a Proprietorship Company That Is Organised
The OPC will turn the unorganized sector of proprietorship into a private limited company that is more organized. Various sole proprietorships and small and medium businesses may enter the corporate realm. The more organized version of OPC will make it easier to get better banking terms. The liability of owners is always unlimited. The member's liability is limited if the proprietor conducts business through an OPC.
● Limitation of Liability for Directors and Shareholders:
The desire for limited liability is undoubtedly the most compelling reason for shareholders to form a "single-person company." Because an entrepreneur's personal assets cannot always be protected in the event of a business failure, it is critical to safeguard the owner's personal assets in the event of a business failure. When a proprietorship firm fails, the proprietor's personal assets are at risk, but this is not the case with a One Person Private Limited Company, because the shareholder's liability is limited to his shareholding. This means that losses or debt payments incurred exclusively for commercial purposes have no impact on a business owner's personal savings or income. If the business is unable to pay its debts, the individual must pay them in the case of a sole proprietorship; in the case of a one-person company, the individual is not responsible for such debts.
An OPC provides entrepreneurs with the benefit of limited liability, with the member's liability limited to unpaid subscription money. In the case of a sole proprietorship, this benefit is not available. "As a direct consequence, OPC enables citizens to take risks without compromising their personal assets."
● For One's Business, Legal Status, and Social Recognition
The most common business structure in the world is a one-person company, which is also known as a private limited company. Provides suppliers and customers with a sense of trust in the business. Rather than dealing with sole proprietorships, large corporations prefer to work with private limited companies. The Pvt. Ltd. business structure has corporate status in society, which aids the entrepreneur in attracting and retaining quality employees by providing corporate designations such as directorship. Proprietorship firms are not permitted to use these designations.
● Sufficient Safeguarding
In the event that the sole person dies or becomes disabled, another person should be appointed as a nominee director. When the original director passes away, the company's affairs will be managed by the nominee director until the shares are transferred to the legal heirs of the deceased member.
Disadvantages of One Person Company
● Members:
The number of members in a one-person company can be as low as one or as high as one. A minor is ineligible to join the One Person Company as a member or nominee or to hold shares with beneficial interest. Only a natural person who is an Indian citizen and resides in India is eligible to form a One Person Company and serve as a nominee for the company's sole member.
● Mostly Suitable for Small Businesses:
Only small businesses should use OPC. OPC can have a maximum paid-up capital of Rs.50 lakhs and a maximum turnover of Rs.2 crores. Otherwise, OPC must be transformed into a Private Limited Company.
● Activities in Business:
A one-person company cannot participate in non-banking financial investment activities, such as investing in the securities of other companies, and it cannot be incorporated or converted into a company under Section 8 of the Act.
● Perpetual Succession:
This is also a challenge to the concept of forming a separate legal entity for perpetual succession, which is the continuation of the company even after a member dies or retires. Because, in the event of the death of an existing member, the nominee whose name is mentioned in the memorandum of association will become a member of the company. However, it is unlikely that it would benefit the company because the person is not a member of the company and is not involved in the day-to-day operations of the company. As a result, the business would not be able to continue after the member's death.
Though the Act grants a One Person company a slew of exemptions in terms of holding AGMs, EGMs, Quorum of meetings, voting rights restrictions, and filing financial statements, the incorporation of such a company requires a lot of paperwork when compared to a sole proprietorship. Because of the procedural complexities involved in forming a One Person Company, this concept may be less appealing to sole proprietors.
● Ownership and Control Separation:
This is one of the company's characteristics that is seriously challenged by the new Companies Act, 2013, which blurs the line between ownership and control. As a result, unethical business practices may emerge.
Documents Required for Registration of One Person Company
1. Director / Shareholder / Nominee Documents
- Permanent Account Number (PAN) Card (A. Identity Proof)
- Aadhaar Card, Passport, Driver's License, or Voter ID Card
2. Address Verification
- Telephone / Mobile Phone Bill
- Bills for electricity and water
- A bank statement or a bank passbook containing the most recent transactions (Any one of the Documents not older than 2 months)
3. Passport-size photos – 3 per person Notes:
- The telephone bill, mobile bill, electricity bill, and bank account statement must be in the applicant's name and no more than two months old.
- Documents that are not in English should be translated into English.
4. Documents that all DIRECTOR(S) must sign:
- Consent to Act as Director: DIR-2 form
- DIN Specifications
- DIN Declaration (If DIN is allotted already)
5. Shareholder Signatures on Documents
- Digital Signature Certificate Application (DSC)
- Subscribers' & Director's Affidavit: INC-9
6. Documents that the Nominee Shareholder must sign
- Nominee Shareholder Information
- Consent of Shareholder Nomination – Form INC-3
7. If applicable, documents from the company/LLP/trademark owner
- Board Resolution / Formal Authorization for Name/Trademark Use
- Company / LLP Authorization for Execution Documents
8. Registered Office
- Letter of No Objection from the Owner of the Address to Use the Address as the Company's Registered Office.
9. Address Proof - In the name of the address's owner.
- Electricity, telephone (fixed line only), gas, or water bill (not older than 2 months); or b. Tax Paid Receipt or Copy of Registered Sale Deed. A copy of the Electricity Bill / Tax Receipt, as well as a copy of the Lease Agreement with specific powers to sublease or issue NOC letters for use of the premise as a Registered Office address under the Companies Act, is required if the Address facility is obtained from a Shared Office Service provider.
Capital Required to start a One Person Company
In India, a minimum of one person is required to start the OPC. These corporations must have at least one director. A person can be both a shareholder and a director of a corporation. No Minimum Capital: The capital of the business is determined by the needs of the business, and there is no legal requirement for a minimum capital to start the OPC. OPC, on the other hand, requires a minimum authorized and subscribed share capital of Rupees one lakh.
One Resident Director: Among the directors, one must be an Indian resident. The name of the OPC should be unique and should not be confusingly similar to any other company or trademark.
Registration Process of a One Person Company in India
Step 1: Submit an application for DSC.
The first step is to obtain the proposed Director's Digital Signature Certificate (DSC), which requires the following documents:
Step 2: Fill out an application for a DIN number.
Following the formation of the Digital Signature Certificate (DSC), the suggested Director's Director Identification Number (DIN) must be utilised for in the SPICe Form, along with verification documents of the director's name and address. Only existing businesses are eligible to use Form DIR-3. It means that beginning in January 2018, the applicant will not be required to file Form DIR-3 separately. In the SPICe form, DIN can now be applied to up to three directors.
Step 3: Submit a Name Approval Request
The next step in forming an OPC is to choose a name for the business. The company's name will be "ABC (OPC) Private Limited."
In the Form SPICe+ 32 application, the name can be approved. In the Form SPICe+ 32 application, you can only list one preferred name and explain why it's important to keep it.If your name is rejected, you can resubmit one using a new Form SPICe+ 32 approval process.
We will proceed to the next step once the MCA has approved the name.
Step 4: Required Documents
We must first prepare the following documents, which must be submitted to the ROC:
The Memorandum of Association (MoA) lays out the organisational objectives, as well as the commercial business it will conduct.
The Articles of Association (AoA) establish the company's operating procedures.
Because there is only one Director and one member, a nominee must be appointed on behalf of such a person in case he becomes incapacitated or dies and is unable to perform his duties, the nominee will perform on behalf of the director and take his place. Along with his PAN card and Aadhar card, his consent in Form INC – 3 will be taken.
Proof of the proposed Company's registered office, as well as proof of ownership and a letter of authorization from the owner.
The suggested Director is declared and consented to using the forms INC -9 and DIR – 2.
A statement signed by the professional attesting to the fact that all requirements have been met.
Step 5: Submitting Forms to the MCA
All of these documents, along with the Director's and professional's DSCs, will be attached to the SPICe Form, SPICe-MOA, and SPICe-AOA, and uploaded to the MCA site for approval. At the time of the company's incorporation, the Pan Number and TAN have generated automatically. It is not necessary to submit separate applications for obtaining a PAN and a TAN.
Step 6: The Certificate of Incorporation is issued.
The Registrar of Companies (ROC) will issue a Certificate of Incorporation after verification, and we will be able to start our business.
Compliances for a One Person Company
The compliances were recommended by a committee led by Dr. JJ Irani in 2005. A one-person company is one that is made up of only one person. Because a one-person company is incorporated as a private company, it is subject to all of the provisions that apply to a private company.
Features of Compliances of One Person Company:
A A one-person company is subject to all of the provisions of a private company.
B A single-person company can only have one nominee, who must be named when the documents for incorporation are submitted.
C A one-person company cannot have perpetual succession. A one-person company can only have one director.
D For a one-person company, there is no minimum paid-up share capital.
Conclusion
On many levels, such as the cost of incorporation, the number of people required to incorporate, and compliance, one-person companies are very similar. One Person Company, on the other hand, has a lot more restrictions on foreign promoter participation, mandatory conversion to a private limited company, and so on.
The registration process, entails several steps and can be time-consuming. Complying with such requirements necessitates a significant amount of knowledge and experience. As a result, it is always best to seek professional advice from our Free Tax Filer team.
Frequently Asked Questions (FAQs)
1. Who qualifies for membership in an OPC?
Only a natural person who is an Indian citizen and resides in India is eligible to serve on an OPC as a member and nominee. The term "resident in India" refers to a person who has spent at least one hundred and eighty-two days in India during the previous financial year.
2. Is it possible for a person to be a member of more than one OPC?
No, a person can only be a member of one OPC at a time.
3. Is there any financial benefit to forming an OPC?
An OPC has no specific tax advantage over any other type of business. The tax rate is a flat 30%, and other tax provisions such as MAT and Dividend Distribution Tax (DDT) apply as they do to any other type of business.
4. Is there a minimum number of OPCs that must be converted into either a private or public company?
In the Companies (Incorporation) Second Amendment Rules, 2021, the mandatory conversion of OPC upon meeting the criteria of exceeding the minimum paid-up capital and average annual turnover was repealed. As a result, an OPC that increases its paid-up capital and average annual turnover does not have to convert into a private or public company.
5. What is the minimum level of compliance that an OPC must meet?
The following are the basic requirements for compliance:
At least one Board Meeting should be held in each half of the calendar year, with no more than 90 days between meetings.
Accounting records must be kept up to date.
Financial Statements are subject to a statutory audit.
Financial Statements (Form AOC-4) and ROC Annual Return (Form MGT-7) must be filed.
6. Who says you can't form an OPC?
A minor, a foreign citizen, a Non-Resident, or anyone who is unable to work due to a contract will not be eligible to join.
7. What is the procedure for converting an OPC to a Private Limited Company?
By passing a special resolution after increasing the minimum number of members and directors to two, an OPC can be converted voluntarily into a private limited company. For the conversion of OPC to a private limited company, a written No Objection Certificate (NOC) from the creditors is required.
8. What exactly is DSC?
While filing the document online, the DSC establishes the sender's or signee's identity electronically. The MCA requires that the Directors use their Digital Signature to sign some of the application documents.
9. What is the number assigned to the director?
It is a unique identification number assigned to all current and potential directors of a company. A Director Identification Number is required for all proposed Directors. A person can only have one DIN, and it never expires.
10. Is forming a Private Limited Company preferable to form an OPC?
OPC is a separate legal entity owned by a single individual. One person's business is a hybrid of sole proprietorship and corporation.
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