A One Person Company (OPC) in India is a type of company structure that allows a single person to establish and manage a business with limited liability. Introduced under the Companies Act, 2013, the OPC structure is particularly useful for solo entrepreneurs and small business owners who want the benefits of a private limited company without needing additional partners or shareholders. CRUISE CORPORATE CONSULTANCY SERVICES Pvt. Ltd. (CCCS) provides expert guidance for registering and managing OPCs efficiently.
Here’s a comprehensive guide on OPC in India:
1. Key Features of a One Person Company (OPC)
Single Owner: An OPC is owned by a single individual who acts as both the shareholder and director. CCCS helps ensure proper documentation for the single-owner setup.
Limited Liability: The owner’s liability is limited to the amount of their capital investment in the company, protecting personal assets from business liabilities.
Separate Legal Entity: The OPC is a distinct legal entity from its owner, meaning it can own property, enter into contracts, and sue or be sued in its own name.
Less Compliance: OPCs enjoy certain exemptions from complex compliance requirements applicable to other company types, such as Private Limited Companies.
2. Advantages of a One Person Company
Complete Control: The single owner has complete control over the company’s operations and decision-making. CCCS emphasizes this benefit for solo entrepreneurs.
Legal Status and Credibility: OPCs offer a separate legal entity status, making it easier to raise funds and enhance business credibility compared to sole proprietorships.
Limited Liability Protection: The owner’s personal assets are protected in case of business losses or debt.
Continuity: Unlike sole proprietorships, OPCs continue to exist even if the owner passes away, provided a nominee has been designated.
Easier Access to Funding: OPCs can secure loans from banks and financial institutions more easily than sole proprietorships.
3. Eligibility Criteria for OPC Formation
Only Indian Residents: Only Indian citizens and residents are eligible to form an OPC.
Single Owner Requirement: Only one person can be a shareholder or director. However, the owner must nominate a person to take over in the event of their death or incapacitation.
Nominee Requirement: The owner must appoint a nominee during incorporation. This nominee can replace the owner in case of their death or incapacity. CCCS can assist with nominee documentation.
4. Limitations of an OPC
Business Type Restriction: OPCs cannot operate as Non-Banking Financial Companies (NBFCs) and cannot engage in investment activities.
Turnover and Capital Limits: If the OPC’s annual turnover exceeds ₹2 crore or its paid-up capital goes beyond ₹50 lakh, it must convert to a Private Limited Company or Public Limited Company.
Limited Expansion Scope: Unlike private limited companies, OPCs are limited in terms of scalability and investment as they cannot issue shares to multiple shareholders.
5. Process for Registering a One Person Company in India
Step 1: Obtain Digital Signature Certificate (DSC) – The proposed director must obtain a DSC to digitally sign documents online. This can be obtained through government-approved agencies.
Step 2: Apply for Director Identification Number (DIN) – The proposed director must also obtain a DIN by submitting the SPICe+ form on the MCA portal.
Step 3: Name Approval – Submit the RUN (Reserve Unique Name) form to reserve a unique name for the OPC. The name should be unique and end with “(OPC) Private Limited.”
Step 4: Filing Incorporation Form (SPICe+) – Use the SPICe+ form to submit incorporation documents, including:
Memorandum of Association (MOA): Describes the OPC’s objectives.
Articles of Association (AOA): Outlines the rules and regulations of the company.
Form INC-3: A consent form for the nominee, who will take over in the event of the owner’s incapacity or death.
Upload these forms on the MCA portal, along with identity and address proofs. CCCS can guide you through this process.
Step 5: Certificate of Incorporation – Once the Registrar of Companies (RoC) verifies the documents, a Certificate of Incorporation is issued, granting the company legal recognition.
Step 6: Apply for PAN and TAN – After incorporation, apply for a Permanent Account Number (PAN) and Tax Account Number (TAN) for tax-related purposes.
Step 7: Open a Bank Account – Open a current account in the OPC’s name for business transactions.
6. Compliance Requirements for an OPC
Board Meetings: An OPC is exempt from holding regular board meetings. However, if the company has more than one director, it should hold at least two board meetings per year.
Annual General Meeting (AGM): OPCs are exempt from conducting AGMs as there is only one shareholder.
Annual Return Filing: File an annual return with the RoC through Form MGT-7A.
Financial Statement Filing: File financial statements in Form AOC-4. These must be audited, similar to other companies. CCCS provides assistance with annual filings.
Income Tax Filing: The OPC must file an annual income tax return with the Income Tax Department.
Statutory Audit: An OPC is required to appoint an auditor within 30 days of incorporation and conduct annual audits.
7. Conversion of OPC to Private or Public Limited Company
Mandatory Conversion: If the OPC’s paid-up capital exceeds ₹50 lakh or annual turnover exceeds ₹2 crore.
Voluntary Conversion: If the owner wishes to expand the business, they can convert the OPC to a Private Limited Company voluntarily after two years from the incorporation date. CCCS can guide this conversion.
8. Differences Between OPC and Private Limited Company
Ownership: An OPC has a single shareholder, while a Private Limited Company requires at least two shareholders.
Board Meetings: OPCs have fewer compliance requirements, as they are not required to hold regular board meetings if there is only one director.
AGM Requirement: Private limited companies must conduct an Annual General Meeting, whereas OPCs are exempt.
Expansion: Private limited companies allow multiple shareholders and can raise capital by selling shares. OPCs are limited to a single shareholder and must convert to a Private Limited Company if they wish to expand.
9. Benefits of OPC for Small Business Owners
Simple Compliance: OPCs have fewer compliance requirements than private limited companies, making them ideal for small businesses and solo entrepreneurs.
Improved Credibility: An OPC has a more professional and credible image than a sole proprietorship, helping secure financing and build trust with customers.
Better Control: The single shareholder has full control over decision-making, unlike in partnership structures where there may be shared control.
Legal Protections: As a separate legal entity, an OPC provides legal protection to the owner’s personal assets. CCCS ensures compliance so you can benefit fully.
10. Conclusion
A One Person Company is an excellent option for small business owners and entrepreneurs looking to establish a business with limited liability and legal recognition. It combines the advantages of a sole proprietorship and a private limited company, allowing single owners to operate independently while enjoying liability protection and an enhanced business image. OPCs are ideal for consultants, freelancers, and other solo professionals who don’t require external partners but wish to establish a credible business structure.
However, an OPC must be prepared for eventual growth as it may need to convert to a Private Limited Company if it surpasses certain financial thresholds. Consulting a company secretary or legal advisor like CCCS can help streamline the OPC registration process and ensure compliance with all legal requirements.
