A One Person Company or more commonly an OPC is a legal entity where only a single individual holds full ownership and controls the entire business operations, thereby allowing an individual to operate as a separate legal entity, enjoying the benefits of limited liability. In this blog, we will cover a comprehensive guide to One person company registration in India.
One person company registration in India is governed by a specific legal framework and regulations that is under the Companies Act. The Act and its ancillary rules define the formation, operation, as well as compliance requirements for OPCs and ensure transparency, accountability and protection of the interests of stakeholders.
Advantages of One Person Company Registration in India
Following are the advantages of One person company registration in India:
Limited Liability:
One of the key advantages of registering as an OPC is the limited liability protection it offers as the liability of the owner does not include his personal assets in case of business debts or legal issues.
Separate Legal Entity:
An OPC is considered a separate legal entity from its owner, which means it has its own identity and existence, thereby enabling the maintenance of a distinction between personal and business assets, contracts and liabilities.
Ease of Formation:
Registering as an OPC involves a simplified and streamlined process compared to other business structures. It requires only one person as a shareholder and director, reducing the administrative burden and complexities associated with multiple shareholders or partners.
Perpetual Succession:
OPCs enjoy perpetual succession, which ensures continuity and stability for the business and provides confidence to stakeholders, such as investors and customers.
Access to Funding and Business Opportunities:
Being a registered entity, an OPC has better access to funding options, such as bank loans, venture capital or angel investments. It also enhances the credibility and reputation of the business, opening doors to potential partnerships and collaborations.
Tax Benefits:
OPCs can avail various tax benefits and incentives offered by the government, depending on the jurisdiction. These may include lower tax rates, exemptions or deductions, providing cost-saving advantages for the business.
Limited Compliance Requirements:
OPCs have fewer compliance obligations compared to larger companies. This makes it easier for the owner to manage legal and regulatory requirements, reducing the administrative burden and costs.
Flexibility and Control:
As the sole owner and director, registering as an OPC provides complete control and decision-making power over the business. This allows for faster decision-making, agility in responding to market changes and flexibility in adapting the business strategy.
Easy Conversion and Expansion:
An OPC can be converted into a private limited company as the business grows. This allows for scalability and facilitates future expansion plans, such as raising additional capital or bringing in more shareholders.
Minimal Compliance and Reporting:
OPCs enjoy relaxed compliance and reporting requirements, making it easier for the owner to focus on business operations and growth.
Eligibility and Requirements for One Person Company Registration in India
The basic requirements for One person company registration in India are:
Minimum requirements for a person to become an OPC:
- The person must be an Indian citizen and resident.
- The minimum age requirement is 18 years.
- The person should not hold citizenship or residency in any other country.
- Only natural persons are eligible to form an OPC; other companies or corporate entities cannot become OPCs.
Conditions for incorporation and registration:
- The owner must nominate a nominee who will become the shareholder in case of the owner’s death or incapacity.
- The nominee must provide written consent to act as a shareholder.
- The Memorandum of Association (MoA) must include the nominee’s name and other required details.
- The MoA must also specify that the company is an OPC.
Restrictions and limitations on OPCs:
- OPCs cannot carry out non-banking financial investment activities.
- They are prohibited from participating in partnerships or collaborations with other companies.
- If the average annual turnover of an OPC exceeds a prescribed threshold or if its paid-up capital surpasses the limit, the OPC must convert into a private limited company within a specified period.
- An OPC cannot be incorporated or converted into a Section 8 company (non-profit organisation).
- If the OPC’s paid-up capital crosses the prescribed threshold, it must be converted into a private limited company.
Procedure for One Person Company Registration in India
The following procedure must be followed for One person company registration in India:
1. Selection of a suitable name for the OPC:
- Choose a unique name that complies with the naming guidelines specified by the Registrar of Companies (RoC).
- Check the availability of the chosen name through the RoC’s online database.
2. Obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN):
- Apply for a DSC, a digital certificate used for online transactions and signing of documents.
- Obtain a DIN for the proposed director of the OPC. This can be done by submitting the DIN application along with the necessary documents.
3. Preparing and filing the documents deemed necessary with the RoC:
- Prepare the Memorandum of Association (MoA) and Articles of Association (AoA) of the OPC.
- Prepare other required documents, such as identity proof, address proof and photographs of the proposed director and nominee.
- File the incorporation documents, including the MoA, AoA and other necessary forms, with the RoC.
4. Payment of registration fees and other associated costs:
- Calculate and pay the prescribed registration fees based on the authorised capital of the OPC.
- Make payments for other associated costs, such as stamp duty and professional fees if engaging a professional for assistance.
Final Thoughts
In this comprehensive guide to One person company registration in India, we saw the numerous advantages and benefits for entrepreneurs looking to establish their own business.
By providing limited liability protection, separate legal entity status, ease of formation and access to funding and business opportunities, OPCs offer a favourable framework for individual business owners. Moreover, OPCs enjoy certain tax benefits, minimal compliance requirements and social recognition, further enhancing their appeal.
For more details, connect with our experts at StartupFino.
