Since the time Companies Act, 2013 came into being, one person companies have become more and more popular. They provide an opportunity for entrepreneurs to be the sole proprietor of their company, but it also protects them from the liabilities of their business. Along with this, it provides a plethora of other advantages.
First, let us discuss the features of One Person Company (OPC).
Features of One Person Company
One person companies, according to the Companies Act 2013, have the following features:
Only one Member : From the very name of OPC we can guess that it can have only one member.
another unique feature is that it only requires one member, one nominee and one director ( who can be the member himself) to start the company.
Private Company: One person companies are legally seen as private companies, so they are given Pvt. Ltd. suffix along with OPC in the name.
One Person Companies come under the rules and regulations of private companies, except that they have certain tax exemptions and compliance benefits.
Nominee:- OPC must have a nominee who’s name is filed to the registrar of companies by his own consent.
No perpetual succession: Other companies have a feature of perpetual succession, where the company does not cease to exist despite death, bankruptcy, change in members, or exit of members. But an OPC does not have that.
After the death of the sole member, the nominee can either choose or reject to become the sole member of the company.
Other than this, OPCs have tax and compliance exemptions that are unique to them.
Benefits of One Person Company
1.) One Person Company requires only one member and a nominee to start the company. A nominee is required to take over the company, in case of death or any incapacity of the original member.
2.) The Company is a legal entity that provides the benefit of limited liability. This allows the entrepreneur to take risks in business as they are not liable to pay the debts and other liabilities of the company if it fails.
3.) It doesn’t need any paid up capital amount to incorporate an One Person Company.
4.) Since the company is a legal entity, it is considered more credible than, say, sole proprietorship. Moreover, the credibility of a company brings more customers and employees; hence, leads to faster expansion of the business.
5.) OPCs are not required to hold an annual general meeting. A resolution signed by the company’s director and filed in the minutes book is sufficient.
6.) In OPCs, Annual return can be signed by company’s director if there is no secretary.
7.) They are not required to prepare a cash flow statement like other companies.
8.) Besides, the government also provides tax exemptions for one person companies.
9.) The sole proprietor can become the sole director of the company and make administrative decisions. However, He/she is free to elect a board of directors with up to 15 members to manage the company.
Along with this, there are some compliance facilities given only to OPCs.
Compliance involves filing of the details of income, expenditure and other company details to the registrar of Company annually.
However, they are required to maintain balance sheets and income tax return are that intimated to the ROC every year by filing form AOC-4 and MGT-7.
Being an ambitious Entrepreneur, one might think of availing these great benefits. In order to do that, you must fit into the eligibility criteria. The eligibility criteria is as follows.
One of the quirks of an OPC is that only a natural person, who is a citizen and resident of India, can be a member or nominee of this company.
This means that other companies cannot be a member of an OPC. Moreover, one will be considered an Indian resident only if they have stayed in India for at least 182 days in the year preceding the calendar year.
Now, if you fit this criteria, you may proceed to prepare for the registration process. Since OPC is a legal entity, it requires registration with the government.
As clear from the benefits provided to OPCs, government encourages entrepreneurship in India. To take it one step further, the Government of India has tried to make the registration process much more easier and convenient. The process has become wholly online.
Nevertheless, it requires certain documents. Here is a list of documents required.
Documents Required for One Person Company
- PAN card copy and digital signature certificate of member, nominee, and director.
- Address proof of the office address to be registered. For example electricity bill, gas bill, NOC from the landlord (if any).
- Memorandum of Association and Article of Association- These documents declare the capital structure and other details about the administration and ownership of the company.
- Declaration of consent from the nominee.
- 4 photographs of each member, nominee, and director.
After the documents are prepared, they are attached in the required application forms.
This year government has launched an integrated online form for registration that provides 10 services in a single form.
The form is called Simplified Performa for Incorporating Company Electronically plus ( SPICe+ ) form, also called INC-32.
To fill all the forms, you need to have an MCA account first. This account is registered on the MCA website by providing required documents, such as DSC.
The SPICe plus form is divided into two parts. Part A is for name registration of the company, and part B is for incorporating the company along with other benefits.
In the part A of the form, a unique name is reserved for the company. It can either be submitted along with the part B or submitted beforehand to ensure name reservation.
Make sure that the name is unique and not prohibited under the Companies Act, 1956, otherwise it will be rejected. It should have Pvt Ltd as suffix.
The form can be submitted by logging into your MCA account. It reserves a name for the company and sends a mail if the name is accepted.
Part B of the form provides a number of services as mentioned below.
- It incorporates the company by the registrar of Company operating in the state , under Companies Act,2013.
- It allots Digital Identification Number (DIN) to the directors of the company.
- It issues PAN and TAN number from the Income Tax Department.
- It registers ESIC registration governed by the ministry of labour and labour development.
- It provides EPFO registration that is mandatory for all business.
- It opens bank account for the company.
- It offers to allot GST identification number to the company.
- It also provides profession tax registration in Maharashtra.
eMOA and eAOA are submitted with INC 33 and INC 34.
If the RoC is satisfied with the documents, the company gets registered within 15 to 20 days.
Some examples successful of OPCs are SCION Bioseed (OPC) Pvt. Ltd., Swaprerna organic products (OPC) Pvt. Ltd., Vestra webisolutions (OPC) Pvt. Ltd.
Frequently Asked Questions (FAQs):
Are there any limitations in forming a one person company?
Yes, there are the following restrictions:-
1.) Only a natural person can form a one-person company.NRIs are not allowed to register a One Person Company.
2.) One Person Company must have a nominee appointed.
3.) A person is not allowed to be a member and nominee of more than one One Person Company.
Can a company retain its status as One Person Company forever?
No, a company cannot continue being an OPC if the paid-up capital exceeds Rs 50 lakhs, and if the company has an annual turnover more than Rs. 2 Crores. It becomes a private limited or a public limited company.
Can a nominee withdraw their consent?
They can withdraw their consent by giving a notice in writing to a member of the company.
What is the capital requirement to start an OPC?
They can withdraw their consent by giving a notice in written to the member of company.
What is the registration fees for incorporating an OPC?
As such, there is no registration fee to apply for a company, but the member has to pay stamp duty charges that varies according to the state from which you apply.
What is the capital requirement to start an OPC
It requires a minimum authorized capital of 1 lakh Rs. However, there is no threshold limit of paid-up capital to start the company.