One - Person Company
OPC Registration:
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One - Person Company (OPC) Registration
The concept of a One Person Company (OPC) was introduced in India under the Companies Act, 2013, to encourage solo entrepreneurs to start their own businesses with limited liability and fewer compliance requirements.
A. What is a One Person Company (OPC)?
An OPC is a company that is owned and operated by a single person. It allows a sole proprietor to enjoy the benefits of a private limited company, including limited liability, separate legal entity, and perpetual succession.
B. Benefits of a One Person Company:
- Limited Liability: Protects personal assets from business liabilities.
- Separate Legal Entity: Distinct identity from the owner.
- Perpetual Succession: Continuous existence despite changes in ownership.
- Ease of Management: Simplified administration and decision-making.
- Tax Benefits: Eligible for corporate tax deductions.
- Increased Credibility: Enhanced professional image and trust.
- Ease of Formation and Maintenance: Simplified incorporation and compliance.
- Nominee Provision: Ensures business continuity.
- Operational Freedom: Complete control over business operations.
- Flexible Conversion: Easy transition to other company forms.
- Compliance Exemptions: Fewer regulatory requirements and no AGM needed.
- Focused Strategy: Better planning and execution with single ownership.
C. Specific Laws Relating to One Person Company
Companies Act, 2013:
- Section 2(62): Defines a One Person Company as a company which has only one person as a member.
Key Provisions:
Incorporation:
- Only a natural person who is an Indian citizen and resident in India is eligible to incorporate an OPC.
- A person can incorporate only one OPC.
- The memorandum of the OPC must indicate the name of the nominee who shall become the member of the company in the event of the subscriber’s death or incapacity.
Nominee:
- The nominee must consent in writing, and the same must be filed with the Registrar of Companies at the time of incorporation.
- The nominee can withdraw consent at any time, and the sole member must nominate another person within 15 days of the notice of withdrawal.
Conversion:
- OPC cannot voluntarily convert into any kind of company unless two years have passed since its incorporation.
- However, if the paid-up share capital exceeds ₹50 lakh or the annual turnover exceeds ₹2 crore, the OPC must mandatorily convert into a private or public company.
Annual General Meeting (AGM):
- OPC is not required to hold an AGM.
Financial Statements:
- The financial statements of an OPC must be signed by one director.
- The board report must contain explanations or comments by the Board on every qualification, reservation, or adverse remark or disclaimer made by the auditor in his report.
D. Incorporation Process for One Person Company
Obtain Digital Signature Certificate (DSC):
- The sole shareholder and the nominee must obtain their DSCs.
Director Identification Number (DIN):
- Apply for DIN for the proposed director (if not already obtained).
Name Approval:
- Apply for name approval through the RUN (Reserve Unique Name) facility on the MCA portal.
Submission of Incorporation Documents:
- File SPICe+ (Simplified Proforma for Incorporating Company Electronically) form
Certificate of Incorporation:
- Upon verification, the Registrar of Companies (ROC) issues the Certificate of Incorporation, which includes the CIN (Corporate Identity Number).
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E. Compliance Requirements for One Person Company
Board Meetings:
- Conduct at least two board meetings each year with a minimum gap of 90 days between them.
Financial Statements and Audit:
- Prepare financial statements and have them audited annually.
- File financial statements in Form AOC-4 and annual returns in Form MGT-7.
Income Tax Filing:
- File annual income tax returns.
GST Compliance:
- Register for GST if applicable and file regular GST returns.
Other Annual Filings:
- OPC must comply with other annual filings and documentation requirements as per the Companies Act.
Related Guides
F. Comparison between One Person Company (OPC) and Partnership Firm:
Parameter | One Person Company (OPC) | Partnership Firm |
| Legal Status | Separate legal entity distinct from its owner. | Not a separate legal entity; partners are collectively the firm. |
| Ownership | Owned by a single individual. | Owned by two or more individuals (partners). |
| Liability | Limited liability; owner’s liability is restricted to the capital invested. | Unlimited liability; partners are personally liable for debts. |
| Formation | Requires incorporation under the Companies Act, 2013. | Can be formed through a Partnership Deed; registration is optional. |
| Number of Members | Only one member and one nominee. | Minimum of two partners; no maximum limit (as per Indian Partnership Act, 1932). |
| Continuity | Perpetual succession; continues despite changes in ownership. | Dissolved upon death or insolvency of any partner, unless otherwise agreed. |
| Compliance Requirements | Higher compliance requirements; mandatory annual filings with ROC. | Lower compliance requirements; audit mandatory only above certain turnover. |
| Management | Sole member has full control. | Joint management by all partners; decisions typically made collectively. |
| Taxation | Taxed as a private company; corporate tax rates apply. | Taxed as a partnership; profits shared among partners are taxed individually. |
| Raising Capital | Easier access to funding and loans; can issue shares. | Limited to partners’ contributions and loans; cannot issue shares. |
| Conversion | Can be converted into a Private Limited Company. | Can be converted into LLP or a private limited company. |
| Transferability of Ownership | Shares can be transferred with restrictions. | Changes in partnership require reconstitution; less flexible. |
| Regulatory Framework | Governed by the Companies Act, 2013. | Governed by the Indian Partnership Act, 1932. |
| Profit Sharing | Sole owner receives all profits. | Profits shared among partners as per the Partnership Deed. |
| Audit Requirement | Mandatory regardless of turnover. | Mandatory only if turnover exceeds specified limits. |
| Decision Making | Faster decision-making as only one owner involved. | Slower decision-making due to involvement of multiple partners. |
Summary
- OPC is ideal for solo entrepreneurs seeking limited liability, a separate legal entity, and easier access to funding, despite higher compliance costs.
- Partnership Firms are suitable for small businesses with multiple owners who prefer simpler formation and lower compliance costs but are willing to accept unlimited liability and potential complications in continuity and decision-making.
G. Comparison between a One Person Company (OPC), a Private Limited Company (PLC), and a Limited Liability Partnership (LLP) based on various parameters:
Parameter | One Person Company (OPC) | Private Limited Company (PLC) | Limited Liability Partnership (LLP) |
Ownership | Owned by a single individual. | Owned by two or more individuals (shareholders); can have a maximum of 200 shareholders. | Owned by partners; can have a minimum of 2 partners and no maximum limit. |
Liability | Limited liability; owner’s liability is restricted to the capital invested. | Limited liability; shareholders are not personally liable for debts of the company. | Limited liability; partners are not personally liable for debts of the LLP. |
Formation | Requires incorporation under the Companies Act, 2013. | Requires incorporation under the Companies Act, 2013. | Requires registration under the Limited Liability Partnership Act, 2008. |
Number of Members | Only one member and one nominee. | Minimum of two shareholders; maximum of 200 shareholders. | Minimum of 2 partners; no maximum limit. |
Continuity | Perpetual succession; continues despite changes in ownership. | Perpetual succession; continues despite changes in ownership. | Perpetual succession; continues despite changes in partnership. |
Compliance Requirements | Higher compliance requirements; mandatory annual filings with ROC. | Higher compliance requirements; mandatory annual filings with ROC. | Moderate compliance requirements; less than PLC, but more than OPC. |
Management | Sole member has full control. | Managed by directors appointed by shareholders. | Managed by partners, with flexibility in management structure. |
Taxation | Taxed as a private company; corporate tax rates apply. | Taxed as a private company; corporate tax rates apply. | Taxed as a partnership; profits are taxed at the partner level. |
Raising Capital | Limited to personal funds and loans; cannot issue shares. | Can raise funds through the sale of shares to investors. | Limited to partners’ contributions and loans; cannot issue shares. |
Conversion | Can be converted into a Private Limited Company. | Can be converted into an LLP or a public limited company. | Can be converted into a private limited company. |
Transferability of Ownership | Shares can be transferred with restrictions. | Shares can be freely transferred subject to certain restrictions. | Transfer of ownership requires consent of all partners. |
Regulatory Framework | Governed by the Companies Act, 2013. | Governed by the Companies Act, 2013. | Governed by the Limited Liability Partnership Act, 2008. |
Profit Sharing | Sole owner receives all profits. | Profits distributed among shareholders as dividends. | Profits shared among partners as per the LLP agreement. |
Audit Requirement | Mandatory regardless of turnover. | Mandatory for companies above specified turnover and capital limits. | Mandatory only if turnover exceeds specified limits. |
Decision Making | Faster decision-making as only one owner involved. | Decision-making influenced by shareholders and directors. | Decision-making influenced by partners. |
Summary:
- OPC is suitable for solo entrepreneurs seeking limited liability and ease of management but with higher compliance requirements compared to a partnership.
- PLC is ideal for businesses looking to raise external capital, enjoy limited liability, and have a structured management system.
- LLP is suitable for professionals and small businesses wanting the benefits of limited liability while maintaining flexibility in management and fewer compliance requirements compared to a PLC.
H.Frequently asked questions (FAQs) regarding One Person Companies (OPCs)
Any Indian citizen and resident who is not a minor can form an OPC. Additionally, only natural persons can be members and nominees of an OPC.
An OPC can have only one member and one nominee.
The liability of the owner in an OPC is limited to the extent of the capital invested in the company. Personal assets of the owner are protected from business liabilities.
There is no minimum capital requirement for incorporating an OPC in India.
Yes, an OPC can be converted into a Private Limited Company if it exceeds the prescribed thresholds for turnover and paid-up capital.
An OPC has certain compliance requirements such as:
- Annual filings with the Registrar of Companies (ROC).
- Holding at least one board meeting in each half of the calendar year.
Preparing and filing financial statements and annual returns with the ROC.
No, an OPC cannot issue shares. It can only have one member who holds the entire shareholding of the company.
In the event of the death or incapacity of the sole member of an OPC, the nominee appointed by the member takes over the ownership of the company.
Yes, an OPC must have a registered office within 30 days of its incorporation. The registered office must be capable of receiving and acknowledging all communications and notices.
Yes, an OPC can enter into contracts and agreements in its own name. The sole member acts on behalf of the company.
Advantages of forming an OPC include:
- Limited liability protection for the owner.
- Perpetual succession ensuring continuity.
- Easier compliance requirements compared to private limited companies.
- Enhanced credibility and professional image.
Yes, an NRI (Non-Resident Indian) or a foreign national can form an OPC in India, provided certain conditions are met.
An OPC is taxed as a private company, and corporate tax rates apply to its profits.
No, an OPC cannot be converted into an LLP. However, an LLP can be converted into an OPC.
I. Essential Documents required for incorporation of an OPC:
To incorporate a One Person Company (OPC) in India, you need to prepare and submit various documents. Here’s a list of essential documents required for the incorporation of an OPC:
For the Director (Sole Member):
Identity Proof:
- Self-attested copy of PAN card (mandatory).
- Self-attested copy of Aadhaar card or Voter ID card or Passport or Driving License (any one).
Address Proof:
- Self-attested copy of Aadhaar card or Voter ID card or Passport or Driving License (any one).
- Recent utility bill (electricity bill, telephone bill, etc.) or bank statement in the name of the director (not older than 2 months).
Passport-sized Photograph:
- Recent passport-sized photograph of the director.
Email ID and Mobile Number:
- Valid email address and mobile number for communication purposes.
Digital Signature Certificate (DSC):
- DSC of the sole director is mandatory for signing the incorporation documents.
For the Nominee:
Identity Proof:
- Self-attested copy of PAN card (mandatory).
- Self-attested copy of Aadhaar card or Voter ID card or Passport or Driving License (any one).
Address Proof:
- Self-attested copy of Aadhaar card or Voter ID card or Passport or Driving License (any one).
- Recent utility bill (electricity bill, telephone bill, etc.) or bank statement in the name of the nominee (not older than 2 months).
Passport-sized Photograph:
- Recent passport-sized photograph of the nominee.
Consent Letter:
- Consent of the nominee to act as the nominee of the sole member in case of the member’s death or incapacity.
Registered Office:
Address Proof:
- Rent agreement or lease agreement (if the premises are rented).
- Sale deed or property tax receipt (if the premises are owned).
- NOC (No Objection Certificate) from the owner of the premises.
Utility Bill:
- Recent utility bill (electricity bill, telephone bill, etc.) in the name of the premises owner (not older than 2 months).
Note:
- All documents should be self-attested by the director and the nominee.
- In case of non-availability of any address proof in the name of the director/nominee, an affidavit stating the same and a rent agreement for the registered office can be submitted.
- The specific requirements may vary depending on the jurisdiction and the specific circumstances of the OPC’s incorporation. It is advisable to consult with a professional or a company secretary for accurate guidance.