The Companies Act, 2013 has introduced the concept of One Person Company. This is a better version of a sole proprietorship, and because of its easy compliance, many entrepreneurs choose to set up this company. This idea was new in Indian corporate law, but several nations are already using this concept. Some examples are China, the UK, Singapore, the USA and Australia.
The main objective of OPC is to promote entrepreneurship among young entrepreneurs and people who want to establish a business on their own. The OPC has multiple advantages and the process of incorporating is also easy.
What is One Person Company?
A One Person Company (OPC) is a company started by a single person with all the benefits of a private limited company such as limited liability, simple setup, and full control. Any individual who wants to become a solo entrepreneur must choose OPC. It has many benefits:
- Easy paperwork and quick registration process.
- Protection of personal assets from company debts because of limited liability.
- Complete control of the decisions of the company.
- Lower compliance and registration fee requirements.
- Tax deductions and simplified tax filing.
- Access to more investors as compared to sole proprietorship.
In One Person Company (OPC), one individual who is a resident of NRI can incorporate his/her business with the features of the company and the benefits of sole proprietorship.
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Number of Members and Directors in OPC
The OPC can only have one member and the member will be presumed to be the first Director. Until the other director(s) are appointed lawfully as per Section 152(1) of the Act. The number of directors in OPC can be as low as one and as high as fifteen. To increase the limit of the number of directors, the OPC have to enact a specific resolution to the effect.
Features of One-Person Company
The key features of a One Person Company in India are as follows:
- Single Shareholder and Director: In an OPC, only a single person can become a member or director which helps simplify the company’s structure. Also, the process of decision-making becomes easy.
- Limited Liability: in the business, the members have the advantage of limited liability which means their assets are protected from company debts.
- Separate Legal Entity: the company has a separate legal entity from its sole members that offers legal protection and credibility.
- Perpetual Succession: The company can continue even after the death or incapacity of a single member.
- Simpler Compliance: As compared to other types of companies, the compliances of OPC are simpler for registration which saves time and resources.
- Minimum Authorised Share Capital: Every individual can set up an OPC because of the minimum authorised share capital which is Rs. 1 lakh.
- Conversion to Private Limited Company: If the OPC exceeds the turnover of Rs. 20 crore for three consecutive years, then it will convert into a private limited company.
- Suitable for Startups and Solopreneurs: For new entrepreneurs and individuals, OPC is a simple and cost-effective way to enter the corporate world.
Some other features are:
- A member of OPC can appoint a nominee to take over the company in case of a single member’s death or incapacity.
- Avail tax benefits such as lower tax rates and deductions on business expenses.
- They can raise funds through angel investors and venture capitalists.
How to Incorporate an OPC?
To incorporate an OPC there are two ways; one is through filling the Reserve Unique Name and another one is without filling a RUN. Below is the process of incorporating an OPC in two ways:
Incorporation Through SPICe (Without Filling RUN)
The company can avail of these 5 different services in one form by applying for a new company through the SPICe form (INC-32):
- Name Reservation
- Allotment of Director Identification Number (DIN)
- Incorporation of New Company
- Allotment of PAN
- Allotment of TAN
The SPICe form is a simplified proforma for incorporating the company electronically with eMoA (INC-33) and eAoA (INC-34). In case the eMoA and eAoA are not available, the users can attract the PDF of MoA and AoA. However, there is no need to reserve a name separately before filling SPICe form. One name of the company can be applied through the form.
Incorporation Through SPICe (With RUN)
- The service of Reserve Unique Name (RUN) must be used for name availability.
- After the name approval, the SPICe must file for incorporation of the OPC within 20 days from the date of approval of RUN.
- The company can file form INC-22 within 30 days once form SPICe is registered in case the address of correspondence and registered office address are not the same.
Who can Become a Member of OPC?
An individual who can become a member of an OPC must fulfil the requirements to act as a member or a nominee:
- You must be a natural person.
- Indian citizen and resident of India.
Note: The person must stay in India for not less than one hundred and eighty-two days during the immediately preceding financial year.
Conclusion
The OPC is a company that any single individual can establish and there is no need to have a heavy share capital and a fixed number of directors. After the implementation of the concept, many companies came and set up businesses. For setting up a One Person Company registration is a must to complete through the MCA website. It is advisable to get help from the experts.