One Person Company/Sole Proprietorship
In India, the concept of One Person Company (OPC) was presented to support the individual entrepreneurs through the introduction of the Companies Act, 2013. As the name suggests, only one member can incorporate One Person Company in India whose liability will be limited as that of private companies.
A single person was not able to start a Company; previously as at least two Directors and Members are required to establish a private company whereas in a Public Company, three Directors and seven members are required. But now as per Section 62 of the Company’s Act 2013, a company can be formed with just one Director and one member. It is another form of a private company. Register an OPC company in India with help of Company Vakil.
For registration of one person Company, one must have an in-depth knowledge of its features and facilities. For this, one can consult the services of Company Vakil. It offers services in company registration like registration of Pvt. Limited Company, LLP Registrations and OPC Registrations. Get a consultation for registration of one person company in India by arranging an appointment Alphabet Legal.
- Separate Legal Entity: One Person Company enjoys the recognition as a separate legal entity and it is considered distinct and different from it sole director and owner.
- Improved Credibility: By registering, the credibility of One Person Company can be improved as a corporate entity which enables the service providers to yield more projects from the potential clients.
- Single promoter: It is easy for the sole owner and promoter to manage and get it registered by following easy steps.
- Easy and Online: The registration process is quite easy, efficient, affordable, guaranteed and moreover, one can get the OPC registered online through Company Vakil without any hassle.
- Just Rs. 8,999: It costs just Rs. 8,999 for a person who is looking for OPC registration through Company Vakil.
- Less Compliance: OPC Registration demands lesser compliance in comparison to Private companies and other forms of companies.
- Limited Liability: OPC protects the assets of the promoter by providing limited liability protection services as similar to that of private companies
- Obtain Director Identification Number (DIN) – Once the process of Digital Signature Certificate (DSC) is completed, further is the step to apply for the Director Identification Number (DIN) of the proposed Director in the Form DIR – 3 along with the name and the address proof of the director..
- Name search and finalization – While incorporating an OPC, the next step is to decide on the name of the Company. One has to file INC – 1 to get the name approval from the Ministry of Corporate Affairs (MCA). This can be done by giving six names in the order of the preference.
- SPICe form submission – All the documents need to be attached to SPICe MOA, SPICe Form, and SPICe AOA along with the DSC of the Director and the professional, and it will be uploaded to the MCA site for their approval.
- Certificate of Incorporation – Upon verification, the Registrar of Companies (ROC) issues a Certificate of Incorporation and one can commence their business after receiving a Certificate of Incorporation.
Following are the requirements that are needed to be complied with for starting the One Person Company.
- It is stated that only a natural person who is a resident of India will only be eligible to act as a member and nominee of a One Person Company.
- No one can be a part of two or more OPCs. A person can join only one OPC.
- A minimum of one shareholder and one Director is required for its registration. The director and the promoter can be the same person.
- One nominee is also required.
- The Minimum Authorised Share Capital required is to be Rs. 1 Lakhs.
- Director Identification Number is required for the directors and Digital Signatures are required from a promoter and a witness.
- After the OPC is registered, the company will have to maintain proper books of accounts and also will have to participate in a Statutory audit of Financial Statements. Along with that, OPC will have to file a business income tax return every year before 30th September.
The chief advantage of One Person Company (OPC) is that there can only be one member to start an OPC. It is a separate legal unit proposing limited liability shied to the promoters as well it has continuity of business and easy to incorporate. Apart from enjoying a recognition and prestige as a separate legal entity, OPCs has following advantages:
- Easy Funding – Drawing funds for a ‘one person company’ is really an easy task. The manner in which different Private Limited Companies draw their funds, in the same manner, ‘One Person Company’ can also efficiently draw their funds. These manner and method include drawing funds from different financial institutions, money lenders, venture capitals, angel investors, loans from bank at lower interest rates, etc. Also, because of the simple framework of the ‘One Person Company’, banks prefer it over partnership firms, for the purpose of providing loans. Also these loans do not require any collateral, which means that ‘One Person Company’ can get loans from the banks at a low interest rate that too without submitting any security.
- No minimum capital required – For starting a ‘One Person Company’, there is no need for any minimum capital. The provision, that required the ‘One Person Company’ to have some minimum capital, was abolished in 2014. Now, as per the capacity and capability, ‘One Person Company’ can be started with any amount of capital. For example, now a ‘One Person Company’ can be started even with a capital of Rs. 6000. There is no minimum cap now.
- Limited Liability – In ‘One Person Company’, the head of the company or the director need not pay anything through his assets. His personal assets are secured. This implies that he can take any amount of risk without any concern for his personal assets being affected or harmed by the risk taken. This is one of the most advantageous benefits of ‘One Person Company’ as it encourages the millennials to opt for more ‘One Person Company’ in the form of start-ups. For example, if your ‘One Person Company’ has to repay any of its loans, then the director of the OPC company need not to worry about his personal assets being utilized, as the loan will be repaid using the shares and assets of the OPC Registered in India
- Easy Transferability – Another benefit of ‘One Person Company’ is that its ownership transfer is an easy task to commence. The transfer is simplest as compared to other form of proprietary firms, because in ‘One Person Company’, one only needs to transfer the shares to other entity or firm. Also the documentation involved in the whole process is very minimal. One only needs to make some changes in information related to director, nominee director and shareholders.
- Perpetual Existence – Moving to the next benefit of ‘One Person Company’ is its continued or perpetual existence. ‘One Person Company’ is a legal entity. If in case the director of any ‘One Person Company’ dies or resigns or is removed, then the existence of the ‘One Person Company’ is not affected because of the presence of a nominee director. After the director dies or resigns or is removed, the nominee director takes up the post of the director of that ‘One Person Company’ which ensures that it continues to exist. The existence of a ‘One Person Company’ can be discontinued only when it is legally dissolved.
- Independent legal identity- Next benefit of a ‘One Person Company’ is that has been given a status of a legal entity under Companies Act, 2013. This implies that in the eyes of law, ‘One Person Company’ is considered as a separate legal person. By virtue of it having an independent legal identity, it can sue or be sued, can sell, buy and property or shares and enjoy the rights over the property under its title, just like a private individual does with his personal property. In case of any suit filed by a third party for any compensation or any legal injury, it is filed against the ‘One Person Company’ and the members can not be personally sued.
- Single Owner –Another important advantage of a ‘One Person Company’ is that it only needs a single member to run the company. The presence of single director, shareholder and promoter, fastens the administration of the company as the decision making process becomes hassle free due to the absence of different and conflicting opinions, which normally is a problem in companies with multiple directors and members. This helps in avoiding any delays and also aids in the maintenance of secrecy of the business code of a ‘One Person Company’.
- Conversion to ‘Private Limited Company’ is Easy – It is mandatory for a ‘One Person Company’ to convert to a private limited company once its turnover crosses Rs. 2 Crore and capital becomes more than Rs. 50 Lacs. After at least 2 years have passed by, a ‘One Person Company’ can be easily converted into a private limited company by filling a form. ‘One Person Company’ acts as a testing stage where the start-up can test whether the company is capable of earning profit and is able to make its position in the market. Once he (entrepreneur) is satisfied with the start-up, he can then increase his business by simply converting his ‘One Person Company’ into a private limited company which consists of multiple members.
- Less Compliance and simple nature – Another benefit that ‘One Person Company’ provides is its nature and framework. It is the easiest form of registering your company as it requires very less documentation work and is very easy to manage. And due to less paper work, ‘One Person Company’ attracts many investors. This nature of ‘One Person Company’ also makes it easier for the start-ups to hire labor and employees as they are attracted towards it as it is registered, secure and a legal entity. Besides, a ‘One Person Company’ is mostly a small or micro or a medium enterprise which enables it to be governed under the Enterprises Development Act, 2006, and avail the benefits thereby provided.
- Good image in the market –The nature of a ‘One Person Company’, i.e. less paper work and less document work, makes it more credible and secure place to do business. Corporate companies, government agencies, etc prefer ‘One Person Company’ over other proprietorship due the reasons mentioned before. In addition to this, registering a company as a ‘One Person Company’ also gives it a recognition in the International sphere.
- More opportunities due to Limited liability – One of the major advantages that One Person Company enjoys is that it has more opportunities since the liability of the OPC is limited and the individual could take more risk in business without affecting or suffering the loss of personal assets. It is the encouragement to new, young and innovative start-ups.
- OPC as SSI Unit – An OPC can avail the various benefits that are being provided to the Small Scale Industries like easy funding from the bank or the lower rate of Interest on loans without depositing any security in return.
- Credit Rating – The OPC with bad credit rating may even get the loan. The credit rating of the OPC is immaterial if the rating of OPC is as per norms.
- Taxation Benefits – The remuneration that is paid to the director will be allowable for deduction as per income tax laws. Benefits of presumptive taxation are also available to the OPCs which are subject to income tax act.
- OPC as an MSME – The newly set-up OPC can be a Micro, small and medium Enterprise (MSME), hence it is covered under the Enterprises Development Act, 2006 act. Thus OPC enjoys the benefits of this act as well. As per this Act, if the buyer receives his/her payment after a specified period, he is entitled to receive three times the interest on the bank rate.
Even if the One Person Company allows a single person to operate the company’s day-to-day activities, at the same time, it has several drawbacks as mentioned below. Everyone looking to incorporate One person Company must keep these limitations in mind before registration.
- Every One Person Company must suggest a nominee Director in its MoA and AoA who will be offered the ownership of the OPC in case of the incapacitated sole Director.
- Also, if OPC crosses an annual turnover of Rs. 2 crores, it has to be converted into a private company.
- One Person Company can have a minimum or maximum no. of one member.
- One Person Company cannot run Non – Banking Financial Investment undertakings comprising investment in securities, etc.
- One Person Company cannot be incorporated or converted into a company under Section 8 of the Act.
- One Person Company is put on the same tax slab as other private companies for taxation purposes. As per the Income Tax Act, 1961, private companies have been placed under the tax bracket of 30% on total income.
- As compared to proprietorship firms, one-person companies need to be registered with the registrar of Companies under the Companies Act, 2013. This entails expenditure on government charges and professional fees which will have to be paid to the CA or CS.
- Also in comparison to proprietorship forms, one person company does have periodic compliance costs every year. It needs to get its accounts audited and will need to file returns yearly.
- A person shall not be eligible to join more than one OPCs or become the nominee in more than one of the similar company.
- NRIs are not allowed for incorporating the One Person Company in India.
- It allows only an Indian citizen to be eligible to incorporate a One Person Company and only a resident of India can be a nominee for the only member of One Person Company.
WHAT WILL YOU GET AFTER COMPANY REGISTRATION?
TOTAL TIME TAKEN
DSC is an electronic online signature issued by licensed certifying authorities. All the proposed directors of the company are required to apply for a digital signature (DSC), it is necessary for digitally signing the electronic incorporation documents.
Directors Identification number is a unique eight-digit number which is a mandatory requirement for all the directors of the company. Ministry of corporate affairs allots a DIN to every director of the company with a lifetime validity without which one cannot be a director.
Once we obtain the DIN and DSC of the directors, a list of 1 to 6 proposed names of the company will be will be submitted to MCA for approval. We will conduct a prior search for your name availability through our unique search portal. We get your company name approved subject to availability and naming guidelines.
After the stage of Name Approval, we draft a Memorandum of association and Articles of association for your company. All the incorporation documents need to be submitted with the prescribed e-form SPICe 32 along with the AOA, MOA, and subscription statement. Once all the documents are duly verified and approved by the government, the certificate of incorporation is emailed to you. During this, we will apply for PAN and TAN of your company.
What is an OPC?
OPC i.e. One Person Company is a blend of both Sole Proprietorship and Private Limited Company and enjoy certain benefits of both types of organisation.
What is a DSC i.e. a Digital Signature Certificate?
DSC is Considered as an Identity of a Director, its an Electronically Encrypted Signature unique to a particular person and has been made Mandatory by MCA for the Director of a Company.
What is Authorized Capital and Paid Up Capital, respectively?
Authorised Capital is the maximum Amount of Equity Share that can be Issued by a Pvt. Ltd. Co. and Paid UP Capital is the total amount of Shares issued to the Shareholders. Authorized Capital can be Raised anytime after Commencement of a Company to issue more Shares to the Shareholders.
Capital required for incorporating a One Person Company?
OPC can be Incorporated with any amount of Capital but no Proof for the same is required during Incorporation Process, Stamp Duty i.e. Govt. Fees has to be paid on Shares issued i.e. Authorised Capital (minimum Shares have to be of Rs. 1,00,000).
On What Address can a One Person Company be registered?
The Address of the Registered office needs to be of India. It can be on an Industrial, Residential or Commercial Premises where Communication from MCA can be received.
Can a Foreign National or an NRI be a Director or Shareholder in an OPC?
Yes a Foreign National or an NRI can be a Director in an OPC but can’t be a share Holder in it.
Difference between a Nominee and Director of an OPC?
For Incorporation of an OPC a Director and a Nominee is required. Director is the one who is the member that Leads, Promotes and Supervises the actions of an OPC but a Nominee is a member who shall on the Death or incapacitation of Promotor member become the member of the OPC.