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One Person Company

A One Person Company has some distinct features which differentiate it from an LLP, a Private Limited Company and other similar forms of business structure.

  • One DSC & One DIN
  • Company Name Reservation
  • MoA & AoA
  • Company PAN & TAN

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What is One Person Company?

A One Person Company can have only one person who will act as a director and the shareholder of the company. Furthermore, in OPC a nominee director might be chosen by the director, to run the company, in case of demise or inability to do so, however, the nominee director has no real power and will have to provide proof of identification during the One Person Company registration process.

A One Person Company is considered to be a suitable option for single entrepreneurs and a considerable improvement over sole proprietorship because of the limited liability factor. When your liability is limited, the debts that your business might have accumulated will not be covered from your possessions or personal belongings but from the amount invested by you in the business. This protects your assets in case of financial crisis.

While there are many advantages of One Person Company registration, it should be remembered that there are no taxation advantages in general, though this too might vary from business to business.

Eligibility Criteria

As the One Person Company Registration needs only one person for the OPC registration but that one person should be a natural person who will be an Indian citizen and resident of India. The chosen person will be eligible to act as a member and a Nominee of the OPC. Moreover, the person should be major of age, competent and have a clean background.

Furthermore, for the above purpose, the term “Resident in India” means a person who has stayed in India for a period of not less than 182 days during the immediately preceding one financial year.

Documents Required for OPC Registration

Scanned copies of the following documents should be submitted by the director and must be notarized in case of foreign nationals, if currently in either a non-Commonwealth country or India. Copies must be apostilled if they reside in a Commonwealth country. All documents must be updated.

  • PAN Card/Passport.
  • Voter's ID/Driver's License/Passport.
  • Bank Statement or Utility Bills (electricity or gas) or Mobile/Telephone Bill.
  • Passport-sized picture.
  • A blank document with signature to serve as the specimen signature.
  • To register your office, submit the scanned copies of the following documents and note that the registered office can be your residence and is not limited to a commercial space.
  • Bank Statement or Utility Bills (electricity or gas) or Mobile/Telephone Bill.
  • Rental Agreement should be notarized and in English.
  • No-objection certificate by property owner.
  • If property is owned, submit a Sale Deed or Property Deed which should be in English.

Once the documents are submitted, the director will apply for a DSC in order to OPC registration of the company.

How to register one person company – a procedure

The first step is to apply One Person Company and obtain a Digital Signature Certificate without which you cannot file other documents pertaining to registration. This application requires only a couple of scanned copies of the documents and details required. The entire process can take up to 5 working days.

Once this application is filed, you will proceed to choose a name for your One Person Company. Remember, this name must be unique, legal and inoffensive in order to be approved. One Person Company name must also be short yet catchy and should help you stand apart from a million other companies. Once you send the other relevant documents, these will enable the filing of SPICe i.e. INC-32 and the AoA and MoA. In 7 working days, the Certificate of Incorporation for OPC registration will not only be approved but half of the One Person Company registration will be done.

Hence, another 2 working days are required to submit hard-copies of the documents needed to get a PAN and TAN for your registered company. Once you submit these documents, the PAN and TAN will be mailed to the office that you registered in about 21 days.

Once these documents are submitted, the director will apply for a DSC in order to register the company.

Compliances under One Person Company Registration

The following are the mandatory compliances for OPC Registration

  • At least One Board meeting in each of half calendar year and make sure the time gap between two board meeting should be not less than 90 days.
  • Statutory Audit of the financial statement. For statutory audit, you need a Chartered Accountant.
  • Maintenance of Proper books of accounts.
  • Filing of Income Tax Return, GST Return, and TDS return in case, every year before 30th September.
  • Filing of Financial statements in Form AOC-4 and ROC Annual Return in Form MGT-7.

Advantages of OPC Registration

  • Credibility –Since an One Person Company registration requires auditors to look over account books regularly, therefore it has significant credibility in the corporate sector.
  • Continues to Exist – In the event of the director's incapacitation or demise, the nominee director takes over the company. The nominee director is selected by the director himself but this position holds no true power until the director himself cannot continue to run the company.
  • Liability is limited – keeps your personal property safe regardless of debt incurred at business.
  • Solo promoter- it gives the opportunity for being solo promoters. It makes sure you are the only decision-maker and controller of the company.

Disadvantages of OPC Registration

Nothing in this world comes without demerits; hence the following are the disadvantages of OPC Registration which are as follows-

1. High Tax Rate

In Sole proprietary, you are required to pay the tax according to your salary with the prescribed tax slab rate like 10%, 20% or 30%. But in the case of OPC Registration, the tax will charge at the 30% income tax. The high tax rate is a big disadvantage to open person company registration.

2. Compliance Cost

Compliance cost of partnership firm or proprietary is very less as compared to One Person Company.

3. OPC is included in Name

You are needed to especially specify the one person company in your company name in the bracket.

4. Only One Person Management

A shareholder is one and all that take all the Decisions. The Company's success and growth are in the hands of one person's decision-making capabilities and knowledge.

5. OPC Incorporation is allowed

You can incorporate only one OPC. In the mean time if you want to start another OPC then it is not allowed.  

6. Not suitable for high turnover

In the event that you want to have a growth in high turnover of your business or you have effectively high turnover, then it will be a wise choice if you build up a private limited company rather than One Person Company.

OPC Registration Fees

The OPC Registration fee varies from company to company. Some company charges high and some are corpbiz the pocket friendly.

Capital Requirement for One person Company Registration

The OPC can have an average turnover of Rs 2 Crores for 3 years if the turnover exceeds the limit then it comes under the mandatory criteria for conversion.

Difference between Sole proprietorship and OPC

Types of Company (Basis) Proprietorship One Person Company Registration
Registration Not mandatory It can be registered under MCA and Companies Act 2013
Legal status Not considered as a separate legal entity Separate Legal Entity
Members Liability Unlimited Liability Limited to the extent
Minimum Number of member Sole Proprietorship Minimum number of person
Maximum number of Members Maximum of One person Maximum of two person
Foreign Ownership Not allowed Allowed if one is the director and the other is the nominee. Both the director and the nominee cannot be foreign citizen
Transferability Not allowed Allowed to one person only
Survival Comes to an end on death or retirement of the member Existence is independent of director or nominee
Taxation Tax will be charged  as an individual Tax rate is 30% on the profit plus cess and surcharge
Annual Filings Income tax returns with the registrar of the company Filed with the registrar of the company

Mandatory Conversion of an OPC to a Private Limited Company

The following are the factor that comes under mandatory conversion of One Person Company to Private Limited Company-

  1. When the increase in the paid-up capital of a One person Company goes beyond rupees 50 lakh and ,
  2. When an increase of average annual turnover during the period of immediately preceding 3 consecutive financial years is beyond rupees 2 crores.

In the above scenario, one person company is required to convert itself into either or private or a public Company within a period of 6 months.

Voluntarily Conversion of an OPC to Private Limited Company

The Following are the factors where voluntarily Conversion of an OPC to Private Limited Company is made:-

  1. When a One Person Company gets incorporated, it cannot voluntarily convert itself to the private or public company before 2 years from the date of incorporations.
  2. If in case the time period has elapsed and 2 years time period is over, a One person company can then apply for conversion to private or public limited company.

Furthermore, the conversion process should be done as per the rules and regulations laid done by the Companies act, 2013 under the section18 and rule 7(4) of the Companies (Incorporation) Rules,2014.

Conclusion

Registering one person company is quite an easy task but it requires professional guidance too. We at corpbiz provides the best professional team for your back.

Frequently Asked Questions

OPC is ideal for single entrepreneurs who want sole ownership of the business but with limited liability. This ensures that your personal property will not be seized and sold in case of financial trouble.

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