ONE PERSON COMPANY PRIVATE LIMITED
ONE PERSON COMPANY PRIVATE LIMITED (OPC)
Unlock your entrepreneurial potential: Exploring the power of One Person Companies.
“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do”
-Steve Jobs-
The Companies Act, 2013 provided birth to the unique idea of the One Person Company. The expert team headed by Dr JJ Irani presented the One Company Person’s first recommendation in 2005. Larger audiences are praising One Person Company because it offers a fresh set of opportunities to individuals who want to set up their own businesses with the framework of a well-run company.
The One Person Company (OPC) has shown to be very beneficial to young entrepreneurs. It offers them all the advantages that come with being in the name of a separate organization, such as access to bank loans, market access, legal protection for their business, and credit availability. With all of the aforementioned reasons taken into account, it can be concluded that, when viewed from a wider angle, one person company proves to be quite advantageous to many aspiring new businessmen in the corporate world.
WHAT IS ONE PERSON COMPANY
The Companies Act of 2013, specifically Section 2(62), was the sole legislation that established guidelines for establishing and operating a one-person company. A one-person company is defined as having just one member. Another crucial issue to keep in mind is that, for all intents and purposes, a one-person company is classified as a private limited company under Section 3 of the Companies Act, even though there is only one person involved in the business. Moreover, an OPC is covered by all clauses pertaining to a private limited company, unless an independent clause specifically states otherwise. It provides all the advantages of a private limited company, including perpetual succession, protection of personal assets from business liabilities, and status as a distinct legal entity. One Person Company’s primary goal was to promote entrepreneurship and the corporatization of microbusinesses.
WHO CAN ESTABLISH THE ONE PERSON COMPANY ?
The establishment of a One Person Company necessitates that the applicant be a “natural person” who resides in India; in order to meet this requirement, the applicant must have been a resident of India for a minimum of one hundred and eighty-two days. Such a person would be qualified to nominate themselves as the One Person Company’s single member and to apply for incorporation of the company.
One Person Company can establish under any of the following categories:
- A company that is limited by guarantee.
- A company with limited shares.
THE DYNAMIC CHARACTERISTICS OF A ONE PERSON COMPANY :
- A natural person who resides in India and is an Indian citizen is the only one who may: a) incorporate a one-person company; b) nominate a one-person company’s only member. The definition of “resident” in India is defined as an individual who has resided in India for a minimum of 122 days during the immediately preceding one calendar year.
- One way that OPCs are different from other business forms is that, at the time of business registration, the only member of the company must designate a nominee. No person may become a nominee in more than one of these companies or incorporate more than one OPC.
- No minor may hold shares with beneficial interests or become a nominee or member of the OPC.
- OPC cannot be incorporated or changed into a company under Section 8 of the Act.
- OPC is not permitted to engage in non-banking financial investment operations, such as buying corporate securities.
- OPC cannot voluntarily convert into any other type of business until two years have passed from the One Person company’s incorporation date, with the exception of situations in which its average annual turnover during the relevant time exceeds 2 crore rupees or in which its paid-up capital is increased beyond 50 lakh rupees.
- A person who is already a member of one OPC may withdraw from both OPCs within one hundred and eighty days of becoming a member of the other OPC as a candidate in that OPC.
- A person who is already a member of one OPC may withdraw from both OPCs within one hundred and eighty days of becoming a member of the other OPC as a candidate in that OPC.
DOCUMENTS REQUIRED FOR OPC REGISTRATION :
The documents required for one-person Company Registration[1]
- PAN card of the director, shareholder and nominee
- Aadhaar card of the director, shareholder and nominee
- Residence proofs of the Nominee: Bank statement or Gas bill or phone bill
- Passport-size photograph of the director and shareholder
- Address proof of the director and shareholder
- NOC from the owner of the registered office
- Rental agreement of the registered office (if it is a rented property)
- Utility bills of the registered office (not older than two months)
- Memorandum Of Association(MOA) and Articles of Association (AOA) of the company
- Digital Signature Certificate of the director and shareholder
- DIN of the director
HOW TO REGISTER ONE PERSON COMPANY?
To use the MCA portal to register a Person Company (OPC) online in India, you must adhere to the instructions listed below:
Step 1: Name the Reservation :
Choosing a distinctive name for the business is the third stage. By completing Form SPICe+ (Part A), you can apply for a name reservation via the MCA site. The name ought to be original and unrelated to any already-existing brand or company.
Step 2: Obtain Digital Signature Certificate (DSC) :
To become a director and shareholder of the company, the first step is to obtain a Digital Signature Certificate (DSC). To sign electronic documents, utilise the digital signature.
Step 3: Obtain Director Identification Number (DIN) :
Getting a Director Identification Number (DIN) for the proposed company director is the next step. The Ministry of Corporate Affairs (MCA) assigns the Directors of a Company a unique identifying number known as the DIN.
Step 4: Preparation of MOA and AOA :
The company’s articles of association (AOA) and memorandum of association (MOA) must be written and filed with the Registrar of Companies (ROC). The company’s objectives are set forth in the MOA, and its internal policies are stated in the AOA.
Step 5: Filing of Forms :
Once the Form is filled, it can be submitted online, along with the necessary documents and the prescribed fee. The ROC will process the application.
Step 6: Issuance of Certificate of Incorporation :
Your company will become registered once the ROC issues a Certificate of Incorporation upon approval of the application and fulfilment of all conditions.
Step 7: PAN and TAN Application:
Upon obtaining the Certificate of Incorporation, submit an application for the company’s Tax Deduction and Collection Account Number (TAN) and Permanent Account Number (PAN).
Step 8: Opening Bank Account:
Lastly, open a bank account and deposit the initial capital in the OPC’s name.
It’s crucial to remember that specific requirements and steps may vary based on the jurisdiction and the laws that are in effect at the time of registration. For accurate and current advice, speaking with a legal or financial professional is advised.
For small business owners who want to launch their ventures with little liability protection, a one-person company is a viable choice. Using the SPICe+ Form to register a one-person company typically takes seven to ten days.
WHY OPC IS MORE SUITABLE FOR STARTUP COMPANIES :
Legal standing :
From the member, the OPC obtains a distinct legal entity standing. The OPC, as a distinct legal entity, protects the single person who incorporated it. Members’ liability is restricted at their shares; they face no personal responsibility for the company’s dissolution. Hence, rather than the member or director, the OPC may be sued by the creditors.
Simple to receive funding :
OPC is a privately held firm, therefore obtaining funding from incubators, venture capitalists, angel financiers, and other sources is simple. Lenders and banks would rather lend money to a corporation than a sole proprietorship. As a result, getting financing becomes simple.
Reduced compliance :
The Companies Act of 2013 grants the OPC specific exemptions concerning compliances. The cash flow statement does not have to be prepared by OPC. The director alone should sign the yearly reports and books of accounts, not the company secretary.
Simple Integration :
OPC is simple to incorporate because it just needs one candidate and one member to be incorporated. A member may also serve as a director. While there is no minimum paid-up capital requirement, OPC incorporation requires a minimum of Rs. 1 lakh in authorised capital. In light of this, incorporation is simpler than with other company structures.
Convenient to regulate :
It is simple to administer the OPC’s affairs because it can be founded and operated by a single person. Making decisions is simple, and the process proceeds quickly. By simply recording the ordinary and extraordinary resolutions in the minute book and having one person sign them, the member can easily pass them. There won’t be any internal disputes or delays, making running and managing the business simple.
Never-ending succession (perpetual succession) :
Perpetual succession is a feature of the OPC, even in the case of a single member. The single-member must designate a nominee in order to incorporate the OPC. The nominee will lead the company in the member’s place once the member passes away.
Exemption from general body meetings:
OPCs are exempt from general meetings, other compliance activities, board meetings, and the AGM procedure. Normally, private limited companies are required to hold general meetings, board meetings, and other compliance activities.
There is no minimum paid-up capital need :
A private limited company can be incorporated with only as much as Rs 5,000 as the minimum approved capital, but there is no minimum paid-up capital requirement. Any number of people can form a business.
RESTRICTIONS IN ONE PERSON COMPANY :
Restrictions on NRIs:
Restriction on Non-Resident Indians (NRIs): The One Person Company concept was introduced with the intention of fostering entrepreneurship and contributing to the nation’s economic prosperity. The fact that only an Indian citizen who was born in India will be able to incorporate a one-person company makes this look ironic. This idea limits foreign direct investment by preventing international corporations and multinational corporations from incorporating their subsidiaries in India as one-person businesses, which on the one hand supports small business owners.
Mandatory to appoint a nominee :
The One Person Company concept was created to allow a single person to start a business on their own without having to waste time and energy searching for a partner. Therefore, it is mandatory to appoint a nominee. The legal requirement that the shareholder choose a nominee, who will become a member of the company at the time of the One Person Company’s incorporation in the event of the subscriber’s death or inability to contract, has destroyed the fundamental objective of this arrangement. This causes issues for the subscriber in terms of finding a nominee and getting his approval, among other procedural difficulties.
Perpetual Succession:
In the case that a subscriber goes away or becomes incapacitated, the nominee whose name has been mentioned will be the only member of the firm. This does not indicate well for the company’s future because someone who is not involved in day-to-day operations would not be able to manage the business effectively, which would result in the company winding up.
CONVERSION FROM ONE PERSON COMPANY INTO A PRIVATE LIMITED COMPANY :
The One Person Company may be converted to a Private Limited Company in the following situations:
when the One Person Company’s paid-up share capital reaches fifty lakh rupees, or when the Company’s average annual turnover exceeds two crore rupees during that period of time.
In both instances, the Company will no longer be maintained as a One Person Company. Such a firm would eventually have to become a private limited company by conversion.
Alternatively, if the average turnover of the company is less than two crores during the relevant period, the company must convert to a one-person company by passing a special resolution at the general meeting. This is applicable to private companies that registered under section 8 of the Companies Act after receiving a share capital of fifty lakh rupees or less.
DIFFERENCE BETWEEN ONE PERSON COMPANY AND SOLE PROPRIETORSHIP FIRM
Legal Structure:
OPC: A One Person Company is a separate legal entity distinct from its owner, offering limited liability protection to the sole shareholder.
Sole Proprietorship: A sole proprietorship is not a separate legal entity; the business and the owner are considered the same entity, resulting in unlimited personal liability for the owner.
Taxability :
OPC: OPC company tax rates are relevant.
Sole proprietorship Firm: The owner is responsible for paying taxes in accordance with their own tax structure.
Ownership:
OPC: An OPC can have only one shareholder who holds all the shares of the company.
Sole Proprietorship: A sole proprietorship firm is owned and operated by a single individual.
Formation Requirements:
OPC: The liability of the shareholder in an OPC is limited to the extent of their investment in the company. Personal assets of the shareholder are generally protected.
Sole Proprietorship: The owner of a sole proprietorship bears unlimited personal liability for the debts and obligations of the business. Personal assets may be at risk in case of business liabilities.
Liability:
OPC: An OPC can have only one shareholder who holds all the shares of the company.
Sole Proprietorship: A sole proprietorship firm is owned and operated by a single individual.
Continuity and Succession:
OPC: An OPC offers better continuity and succession planning as it can be easily transferred or converted into other types of companies like private limited companies.
Sole Proprietorship: A sole proprietorship ceases to exist upon the death or incapacitation of the owner, making succession planning more complex.
Regulatory Compliance:
OPC: OPCs are subject to stricter regulatory compliance requirements compared to sole proprietorships, including filing annual returns, maintaining proper accounting records, and conducting annual general meetings.
Sole Proprietorship: Sole proprietorships have fewer regulatory compliance obligations, making them simpler to manage from a legal and administrative standpoint.
FAQ
FREQUENTLY ASKED QUESTIONS :
What is a One Person Company (OPC)?
A One Person Company (OPC) is a type of business entity where only one person holds the entire shareholding and controls the company.
What are the minimum requirements to form an OPC?
The minimum requirements include having only one shareholder, at least one director, and a nominee who is over 18 years old and not serving as a director in any other OPC.
Is there a limit on the number of OPCs one person can form?
Yes, as per the Companies Act, 2013, one person can only form or be a nominee in one OPC at a time.
What are the advantages of registering as an OPC?
Some advantages include limited liability protection for the sole owner, separate legal entity status, easier compliance requirements compared to other company types, and enhanced credibility in the eyes of customers and suppliers.
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Are there any restrictions on the nature of business activities an OPC can undertake?
OPCs can engage in most business activities, except for certain sectors where specific regulations or restrictions apply, such as banking, insurance, and financial investment activities.
What are the compliance requirements for an OPC?
Compliance requirements include filing annual returns, financial statements, and other statutory documents with the Registrar of Companies (ROC), conducting annual general meetings, and maintaining proper accounting records.
ONE PERSON COMPANY PRIVATE LIMITED
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