The concept of One Person Company in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. One of the biggest advantages of a One Person Company (OPC) is that there can be only one member in an OPC, while a minimum of two members are required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership (LLP). Similar to a Private Limited Company, a One Person Company is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate.
Though a One Person Company allows a lone Entrepreneur to operate a corporate entity with limited liability protection, an OPC does have a few limitations. For instance, every One Person Company (OPC) must nominate a nominee Director in the MOA and AOA of the Company – who will become the owner of the OPC in case the sole Director is disabled. Also, a One Person Company must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year like all types of Companies. Therefore, it is essential for the Entrepreneur to carefully consider the features of a One Person Company before incorporation.
ADVANTAGES OF ONE PERSON COMPANY
- OPC gives limited liability to business owner i.e.liability is limited to the amount you have invested.
- A sole proprietorship ceases to exist on the death of its promoter. In the case of an OPC, the nominee director takes over and the entity continues to exist.
- In a one person company, the ownership can be transferred by altering the shareholding, directorship and nominee director information.
- A company can own property like buildings, godowns and can be considered a legal entity.
Registration Process for One Person Company
The process for registering a One Person Company (OPC) in India is as follows:
- Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN): The first step is to obtain a DSC and DIN for the proposed director of the OPC. The DSC can be obtained from government-approved agencies, while the DIN can be obtained by filing an online application with the Ministry of Corporate Affairs (MCA).
- Name Reservation: The next step is to choose a unique name for the OPC and submit it for approval to the MCA. The name should not be identical or too similar to any existing company or trademark.
- Drafting of Memorandum and Articles of Association: The Memorandum of Association (MOA) and Articles of Association (AOA) of the OPC must be drafted and filed with the MCA. These documents contain the objectives, rules, and regulations of the company.
- Filing of Incorporation Documents: Once the name is approved and the MOA and AOA are drafted, the OPC incorporation documents, including the application for incorporation and the subscriber’s statement, must be filed with the MCA.
- Payment of Fees and Stamp Duty: The required fees and stamp duty must be paid at the time of filing the incorporation documents.
- Certificate of Incorporation: Upon verification of the documents, the MCA will issue a Certificate of Incorporation, which marks the official formation of the OPC.
- PAN and TAN: After obtaining the Certificate of Incorporation, the OPC can apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.
The entire process of OPC registration can take up to 10-15 days, depending on the timely submission of documents and approvals from the government authorities.
Only a natural person who is an Indian citizen and a resident in India is eligible to incorporate a One Person Company or be a nominee member. The Director or Nominee must also be over 18 years of age.
OPC registration is an important thing, without registration you are not allowed to incorporate a One Person Company. As you can see in the above article that registration is important for legal proof and registration will make your OPC as legal entity. The registration process is above mentioned you can check above. The process is very simple and you can apply online for its registration.
As above mentioned, One Person can start with minimum of 1 person.
Yes incorporating a private company involves more cost and compliances to be followed under the companies act, 2013.
MOA is a memorandum of association and AOA is an article of association, these are important documents of a company.
Only a natural person who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company and shall be a nominee for the sole member of a One Person Company.
No, a person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company
A minor shall not be eligible to become a member or nominee of the One Person Company or can hold share with beneficial interest.
OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of anybody corporates.
No. OPC is suitable only for small business. OPC can have maximum Paid up share capital of Rs.50 Lakhs or Turnover of Rs.2 Crores. Otherwise OPC need to be converted into Private Ltd Company.
The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
The word OPC shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.
The sole member shall nominate another person as nominee within 15 days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person.
Every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of and signed by one director or a person authorized by the Board of Directors of the company for the purpose and the Company Secretary, or any other person authorized by the Board for the purpose.
Yes, PAN card is required to apply for GST.