One Person Company

One Person Company (OPC) Registration in India

calendar20 May, 2023
timeReading Time: 11 Minutes
One person Company

One-Person Company (OPC) is a type of business structure introduced in India under the Companies Act, 2013. It is designed to provide a legal framework for individuals to start and operate a company as a single owner, eliminating the need for partners or shareholders. OPC allows sole proprietors to enjoy the benefits of limited liability, separate legal entity status, and perpetual existence, similar to a private limited company.

Here Are Some Key Features of One Person Company (OPC):

  • Single Ownership: OPC can be formed with just one individual as its member and shareholder. The owner has full control and authority over the company’s operations.
  • Limited Liability: The amount of money the owner invested in the company limits their liability. The owner’s personal assets are not in danger if the business experiences any obligations or liabilities.
  • Separate Legal Entity: OPC is considered a separate legal entity distinct from its owner. It can own assets, enter into contracts, and sue or be sued in its own name.
  • Perpetual Existence: OPC has perpetual succession, meaning it continues to exist even if the owner dies or becomes incapacitated. This ensures the continuity of the business and facilitates easier transfer of ownership.
  • Minimum Capital Requirement: Unlike private limited companies, OPCs do not have a minimum capital requirement. The owner can start the company with any amount of capital deemed necessary for the business.
  • Nominee Requirement: The owner of an OPC must nominate a person who will become the successor in case of their death or incapacity. The nominee’s details are provided during the OPC registration process.
  • Compliance Requirements: OPCs are subject to certain compliance requirements similar to private limited companies, such as filing annual financial statements and conducting annual general meetings. However, OPCs have certain exemptions and relaxed compliance norms compared to larger companies.

OPCs are especially beneficial for small businesses, startups, and professionals who wish to operate as a single owner entity while enjoying the advantages of limited liability and corporate status. It provides a formal structure to one-person businesses, enhancing their credibility and ease of doing business.

It’s important to note that OPCs have certain restrictions on their activities and eligibility criteria, and the Companies Act, 2013 sets out the specific regulations and provisions governing the formation and operation of OPCs in India.

Eligibility Criteria for OPC Registration:

To be eligible for One Person Company (OPC) registration in India, certain criteria must be met.

Here Are the Eligibility Requirements:

  • Natural Person:  Only a natural person who is an Indian citizen and resident in India can form an OPC. Foreign nationals and non-resident Indians (NRIs)[1] are ineligible to form an OPC.
  • Sole Member: An OPC can have only one member, who will be the sole owner and shareholder of the company. An OPC can never have more than one member at any given moment.
  • Nominee Appointment: The sole member of an OPC is required to appoint a nominee who will become the successor in case of their death or incapacity. The nominee’s consent to act as a nominee and their details, including name, address, and PAN (Permanent Account Number), must be provided during the OPC registration process.
  • Directorship: The lone director of a corporation must also be the sole member of an OPC. An OPC may have up to 15 directors, but only up to three of them may be appointed without the consent of the company’s shareholders.
  • No Other OPC or Partnership: The Companies Act, 2013 restricts individuals from incorporating or being a nominee in more than one OPC simultaneously. Additionally, an OPC cannot be converted into a Section 8 company (a company formed for charitable or not-for-profit purposes) or be eligible for the benefits extended to small companies under the Act.
  • Turnover and Capital Limit: There are no minimum capitals requirements for OPCs, meaning an OPC can be formed with any amount of capital. However, if the OPC’s paid-up share capital exceeds Rs. 50 lakh (approximately USD 70,000) or if its average annual turnover for the preceding three years exceeds Rs. 2 crore (approximately USD 280,000), the OPC must be converted into a private or public limited company.

Key Requirements for OPC Registration:

To successfully register a One Person Company (OPC) in India, certain key requirements must be fulfilled.

Here Are the Essential Requirements for OPC Registration:

  • Minimum Capital Requirement:
  • There is no specific minimum capital requirement for OPCs. The owner can start the company with any amount of capital they deem suitable for the business. The capital can be contributed in the form of cash, assets, or a combination of both.
  • Appointment of Nominee:
  • The sole member of the OPC must appoint a nominee who will become the successor in case of their death or incapacity. The nominee’s consent and details, including name, address, and PAN (Permanent Account Number), must be provided during the OPC registration process.
  • Board of Directors and Shareholders:
  • While an OPC can have a maximum of 15 directors, the sole member of the OPC must also be the sole director. However, for OPCs with more than one director, the appointment of directors beyond the first director requires the approval of the company’s shareholders. The details of the directors, including their DIN (Director Identification Number), must be provided during registration.
  • Registered Office:
  • Every OPC must have a registered office address within India. This address will be the official correspondence address of the company. The documents for OPC registration should include proof of ownership or permission to use the registered office address.
  • Digital Signature Certificate (DSC) and Director Identification Number (DIN):
  • The owner/director of the OPC must obtain a Digital Signature Certificate (DSC) to electronically sign the registration documents. Additionally, they need to obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA).
  • Name Approval:
  • Choosing a unique and suitable name for the OPC is crucial. The proposed name should not violate any trademark or intellectual property rights and must comply with the naming guidelines provided by the MCA. The name availability and approval process can be conducted through the MCA’s online portal.
  • Incorporation Documents:
  • The registration documents required for OPC include:
  • Memorandum of Association (MOA): It defines the company’s objectives and activities.
  • Articles of Association (AOA): It outlines the company’s internal rules and regulations.
  • Consent and declarations from the sole member and nominee.
  • Affidavits stating that the requirements and provisions of the Companies Act, 2013 are complied with.
  • Professional Certification:
  • The registration documents must be certified by a professional, such as a chartered accountant, company secretary, or cost accountant, who will verify the accuracy of the information provided.
  • Payment of Registration Fees:
  • The required fees for OPC registration must be paid online through the MCA portal. The amount varies depending on the authorized share capital of the company.
  • Once all the necessary requirements are met and the registration documents are prepared and submitted along with the payment of fees, the Registrar of Companies (RoC) will review the application. If everything is in order, the RoC will issue the Certificate of Incorporation, confirming the formation of the OPC.
  • It is advisable to seek professional guidance or consult with a company registration expert to ensure compliance with all the key requirements and to navigate the OPC registration process smoothly.

OPC Registration Process

The process of registering a One Person Company (OPC) in India involves several steps and interactions with the relevant authorities.

Here Is a General Outline of The OPC Registration Process:

  • Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN):
  • The owner/director of the OPC must first obtain a Digital Signature Certificate (DSC) from a government-approved agency. The DSC is required for electronically signing the registration documents.
  • Next, the owner/director needs to obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA). The DIN is a unique identification number required for all directors of a company.
  • Choose a Unique Name and Obtain Name Approval:
  • Choose a unique and suitable name for the OPC. The name should comply with the naming guidelines provided by the MCA and should not violate any trademarks or intellectual property rights.
  • Check the availability of the chosen name through the MCA’s online portal. Submit the required details and documents for name approval.
  • Once the name is approved by the Registrar of Companies (RoC), it will be reserved for the OPC for a specified period.
  • Prepare the Incorporation Documents:
  • Prepare the necessary incorporation documents, including the Memorandum of Association (MOA) and Articles of Association (AOA).
  • The MOA defines the objectives and activities of the OPC, while the AOA outlines the company’s internal rules and regulations.
  • The incorporation documents must also include consent and declarations from the sole member and nominee, stating their willingness to act in the respective roles.
  • Professional Certification and Notarization:
  • Get the incorporation documents certified by a professional, such as a chartered accountant, company secretary, or cost accountant. They will verify the accuracy of the information provided in the documents.
  • Additionally, some documents may require notarization to establish their authenticity.
  • File the Incorporation Documents:
  • Register and create an account on the MCA’s online portal (www.mca.gov.in).
  • Fill out the required forms, such as the SPICe (Simplified Proforma for Incorporating Company Electronically) form, which includes details about the company, its shareholders, directors, registered office address, and other relevant information.
  • Upload the incorporation documents, including the MOA, AOA, consent and declarations, and other required supporting documents.
  • Payment of Registration Fees:
  • Pay the required registration fees online through the MCA portal. The amount varies based on the authorized share capital of the OPC.
  • Review and Approval:
  • The Registrar of Companies (RoC) will review the application, documents, and payment made.
  • If everything is in order and no further information or clarification is required, the RoC will issue the Certificate of Incorporation.
  • Post-Registration Compliance:
  • After receiving the Certificate of Incorporation, the OPC needs to complete certain post-registration compliance requirements, such as opening a bank account for the company, obtaining statutory registrations (PAN, TAN, GST, etc.), and complying with annual filing requirements.
  • It’s important to note that the OPC registration process may involve additional steps and requirements specific to your location and the nature of your business. It is recommended to consult with a legal professional or a company registration expert to ensure a smooth and accurate OPC registration process.

Post-Registration Compliance:

After the registration of a One Person Company (OPC) in India, certain post-registration compliance requirements must be fulfilled. These compliance obligations are important for the proper functioning and legal compliance of the OPC.

Here Are Some Key Post-Registration Compliance Requirements for an OPC:

  • Opening Bank Account:
  • After incorporation, the OPC must open a bank account in the name of the company. The account should be opened within 30 days of receiving the Certificate of Incorporation.
  • The OPC should provide the necessary documents, such as the Certificate of Incorporation, PAN (Permanent Account Number), and other relevant documents, as per the bank’s requirements.
  • Obtaining Statutory Registrations:
  • PAN (Permanent Account Number): Apply for a PAN card in the name of the OPC. PAN is necessary for various financial and tax-related transactions.
  • TAN (Tax Deduction and Collection Account Number): If the OPC is liable to deduct and deposit tax at source, it must obtain a TAN.
  • GST (Goods and Services Tax): If the OPC’s annual turnover exceeds the prescribed threshold, it must register for GST and comply with the GST regulations.
  • Any other applicable registrations: Depending on the nature of the OPC’s business, it may need to obtain additional registrations, such as professional tax registration, import-export code (IEC), etc.
  • Compliance with Annual Filing Requirements:
  • OPCs are required to comply with annual filing requirements to maintain their legal and financial compliance. The following filings are typically required:
  • Annual Financial Statements: OPCs must prepare and file annual financial statements, including the Balance Sheet, Profit and Loss Account, and Cash Flow Statement, within a prescribed timeframe.
  • Annual Return: OPCs must file an annual return containing details of the company’s shareholders, directors, share capital, and other relevant information.
  • Income Tax Returns: OPCs are required to file income tax returns annually, reporting their income and paying any applicable taxes.
  • Maintenance of Books of Accounts:
  • OPCs must maintain proper books of accounts as per the applicable accounting standards. The books of accounts should reflect the company’s financial transactions, assets, liabilities, income, and expenses.
  • OPCs are required to maintain financial records for a specified period, typically for a minimum of eight years.
  • Compliance with Other Regulatory Requirements:
  • OPCs must comply with various other regulatory requirements based on the nature of their business and applicable laws. These may include labor laws, environmental regulations, industry-specific regulations, etc.
  • It is important for the OPC to stay updated with any changes in relevant laws and regulations and ensure ongoing compliance.
  • Conversion to Private Limited Company:
  • If the OPC’s paid-up share capital exceeds Rs. 50 lakh (approximately USD 70,000) or if its average annual turnover for the preceding three years exceeds Rs. 2 crore (approximately USD 280,000), the OPC must be converted into a private limited company within a specified timeframe.
  • It is advisable to seek professional assistance, such as consulting with a chartered accountant or company secretary, to ensure proper compliance with all post-registration requirements. They can guide you through the specific compliance obligations applicable to your OPC and help you fulfill them in a timely and accurate manner.

Benefits and Limitations of OPC:

One Person Companies (OPCs) in India offer several benefits to entrepreneurs and small business owners. However, they also have certain limitations.

Let’s Explore the Benefits and Limitations of Opcs:

  • Benefits of OPCs:
  • Limited Liability: OPCs provide limited liability protection to the sole owner, separating their personal assets from the company’s liabilities. In case of any debts or legal issues, the owner’s personal assets are not at risk.
  • Separate Legal Entity: OPCs are considered separate legal entities, distinct from their owners. This grants them the ability to own assets, enter into contracts, and sue or be sued in their own name.
  • Perpetual Existence: OPCs have perpetual succession, meaning they continue to exist even if the owner dies or becomes incapacitated. This ensures the continuity of the business and facilitates easier transfer of ownership.
  • Ease of Formation: OPCs can be formed with a single person, eliminating the need for partners or shareholders. This simplifies the decision-making process and ensures complete control and authority over the company’s operations.
  • Credibility and Access to Funding: OPCs enjoy more credibility and trust in the market compared to unregistered businesses. This can make it easier to attract customers, suppliers, and potential investors or lenders for funding purposes.
  • Lower Compliance Burden: OPCs have certain exemptions and relaxed compliance norms compared to larger companies. This reduces the administrative burden and compliance costs for the sole owner.
  • Limitations of OPCs:
  • Single Ownership: OPCs can have only one member and do not allow for the addition of partners or shareholders. This restricts the ability to raise funds through equity dilution or share transfers.
  • Capital Requirement for Conversion: If the OPC’s paid-up share capital exceeds Rs. 50 lakh (approximately USD 70,000) or its average annual turnover exceeds Rs. 2 crore (approximately USD 280,000) for three consecutive years, it must be converted into a private limited company. This can involve additional costs and compliance requirements.
  • Restricted Business Activities: OPCs are not allowed to carry out non-banking financial investment activities, including investment in securities of anybody corporate. They are also prohibited from converting into a Section 8 (not-for-profit) company.
  • Compliance Requirements: While OPCs have relaxed compliance norms compared to larger companies, they are still subject to certain annual filing requirements, maintenance of books of accounts, and other regulatory obligations. Failure to comply with these requirements can result in penalties and legal consequences.
  • Limited Growth Potential: OPCs may face limitations in terms of scalability and expansion due to the restriction on raising funds through equity dilution. The single ownership structure can make it challenging to attract investors or enter into joint ventures.
  • It is important to carefully consider the benefits and limitations of OPCs in relation to your business objectives, growth plans, and funding requirements. Consulting with legal and financial professionals can help you make an informed decision about whether an OPC is the most suitable business structure for your specific circumstances.

Frequently Asked Questions (FAQs) About OPC Registration and Their Answers

Q.(1) What Is the Minimum Capital Requirement for OPC Registration?

For OPCs, there is no set minimum capital requirement. The owner can start the company with any amount of capital they deem suitable for the business.

Q.(2) Can A Foreign National or Nri Register an OPC in India?

No, only Indian citizens who are residents in India can register an OPC. Foreign nationals and NRIs are not eligible to form an OPC.

Q.(3) Can An OPC Be Converted into A Private Limited Company?

Yes, if the paid-up share capital of the OPC exceeds Rs. 50 lakh (approximately USD 70,000) or its average annual turnover exceeds Rs. 2 crore (approximately USD 280,000) for three consecutive years, it must be converted into a private limited company.

Q.(4) Can An OPC Be Converted into A Partnership Firm?

No, an OPC cannot be converted into a partnership firm. It can only be converted into a private limited company.

Q.(5) Can An OPC Have Multiple Directors?

While an OPC can have a maximum of 15 directors, the sole member of the OPC must also be the sole director. Approval of the shareholders is required if more than one director is appointed.

Q.(6) Is It Mandatory to Have a Nominee for OPC Registration?

Yes, the sole member of an OPC is required to appoint a nominee who will become the successor in case of their death or incapacity. The nominee’s consent and details must be provided during the OPC registration process.

Q.(7) Is It Possible To Change An OPC Into A Section 8 Company?

No, an OPC cannot be converted into a Section 8 company, which is a company formed for charitable or not-for-profit purposes.

Q.(8) What Is the Time Frame for Registering An OPC?

Depending on the documentation and processing time of the Registrar of Companies (RoC), the OPC registration process normally takes 7 to 14 days.

Q.(9) Can An OPC Be Owned by A Corporate Entity?

No, only a natural person who is an Indian citizen and resides in India may possess an OPC. A corporate entity cannot establish an OPC.

Q.(10) Can An OPC Be Engaged in Any Business Activity?

OPCs can engage in most types of business activities, subject to certain restrictions. However, they cannot transform into a Section 8 company or engage in non-banking financial investing operations.

These FAQs provide a general understanding of OPC registration. But it is suggested that you speak with a legal expert or a company registration expert for personalized advice and accurate information based on the latest regulations and guidelines.

Conclusion

In conclusion, a One Person Company (OPC) in India is a unique business structure that offers several advantages to entrepreneurs who wish to start a company on their own. It provides limited liability protection, separate legal entity status, and perpetual existence. OPCs also enjoy ease of formation, credibility in the market, and reduced compliance burden compared to larger companies.

However, OPCs also have certain limitations, such as restrictions on the number of members and the inability to raise funds through equity dilution. There are compliance requirements to fulfill, and if the OPC exceeds certain thresholds, it must be converted into a private limited company.

To register an OPC, one must fulfill the eligibility criteria, go through the registration process, and comply with post-registration requirements such as opening a bank account, obtaining statutory registrations, and fulfilling annual filing obligations.

It is essential to carefully evaluate the benefits and limitations of OPCs based on your specific business needs, growth plans, and funding requirements. Seeking professional advice can help ensure proper compliance and make informed decisions regarding OPC registration.

Overall, OPCs offer a favorable option for solo entrepreneurs looking to establish a legally recognized and structured business entity with limited liability.

Read our Article:What Are The Mandatory Annual Compliances For One Person Company?

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