What is a One Person Company (OPC)?
The concept of One Person Company (OPC) was introduced as an improvement over the sole proprietorship. As per the provisions of Section 2(62) of the Companies Act, 2013, an OPC is a Company which has only one person as a member.
Salient features of OPCs
Advantages of OPCs
- Separate legal entity;
- Perpetual succession;
- One member is sufficient to incorporate an OPC.
- If an OPC hits an average three-year turnover of over Rs. 2 crores or has a paid-up capital of over Rs. 50 lakhs, it must be converted into a Private Limited Company or Public Limited Company within six months.
- This single shareholder being the owner will be the director of the OPC.
- There is a requirement of a nominee Director, but with no power until the original Director is incapable of entering into contract).
Limitations/ Shortcomings of OPCs
- A single promoter enjoys full control over the Company.
- Limited liability of the Member up to the extent of the paid up capital subscribed by him/her.
- Separate legal entity;
- Perpetual succession;
- An OPC is cheaper to be incorporated as compared to a Private Limited Company;
- An OPC requires comparatively lesser compliances as against the statutory compliances under the Companies Act, 2013 for the Companies;
- As an OPC needs to have its books audited annually, it has greater credibility among vendors and lending institutions as compared to sole proprietorship & partnership firms;
- The requirement regarding convening of Board meetings does not apply to an OPC as in case of a Private Limited Company.
FAQs on One Person Companies (OPCs)
1. Why should I form an OPC?
- Less capital contribution as compared to a Private Limited Company;
- Less management and innovative skills of the OPC as compared to a Private Limited Company;
- Can’t raise capital from the public/ employees/ directors;
- Mandatory appointment of a Nominee Director;
- In case the OPC hits an average three-year turnover of over Rs. 2 crores or has a paid-up capital of over Rs. 50 lakhs, it is mandatory for the OPC to get itself converted into a Private Limited Company or Public Limited Company within six months.
An OPC is a good alternative to a sole proprietorship, largely because it gives limited liability to the business owner. This means that your liability is limited to the amount you’ve invested in the business; business debts cannot be recovered from personal possessions. Also, a sole proprietorship ceases to exist on the death of its promoter. However, in the case of an OPC, the nominee director takes over and the entity continues to exist. Single entrepreneurs who do not have another partner to start a private limited company may also consider it.
2. Who can register an OPC?
Only Indian residents can register an OPC as per the specifications of the Ministry of Corporate Affairs.
3. What are the documents required for the registration of an OPC?
Following are the documents required for the registration of an OPC:-
- Digital signature of the proposed Member/ Director;
- Scanned copy of PAN/ residential address proof such as Election ID, Voter ID, Passport, Aadhar Card, etc (One of them);
- Scanned copy of colored legible photograph of the proposed Member/ Director;
- Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill;
- Proposed name for the OPC;
- Draft MOA & AOA for incorporation;
- Requisite affidavits for incorporation;
- Scanned copy of Notarized Rental Agreement in English/ No-objection Certificate from property owner/ Sale Deed/Property Deed in English (in case of owned property).
The Director must self-attest all his personal documents. In case of foreign nationals and NRIs, all the documents must be notarized (if currently in India or a non-Commonwealth country) or apostiled (if in a Commonwealth country).
Your registered office need not be a commercial space; it can be a residence, too.
4. What are the mandatory day to day requirements of an OPC?
All such businesses must maintain books of accounts, comply with statutory audit requirements, submit income tax returns and annual filings with the ROC.
5. How much capital is required to start an OPC?
There is no difference in capital requirement between an OPC and a Private Limited Company. It needs an authorized capital of Rs. 1 lakh to begin with, but none of this actually needs to be paid-up. This means that you don’t really need to invest any money into the business initially at the time of incorporation.
6. What are the tax advantages available to an OPC?
No general advantages; though some industry-specific advantages are available. Tax is to be paid at a flat rate of 30% of the Net profits of the OPC. Dividend Distribution Tax & Minimum Alternate Tax also applies to an OPC as it applies to a Private Limited Company.
7. How many directors can be appointed in an OPC?
The person starting the business is its only Director and shareholder. There is also a requirement of nominee director, but this person has no power whatsoever for raising equity funds or offer employee stock options. The nominee exists only to take over in case of the death or incapacitation of the Director.
8. Can an individual start more than one OPC at a time?
No, an individual can form only one OPC at a time. This rule applies to the nominee in an OPC too.
- Our organization will guide you to obtain DSC and DIN which are the first and the foremost requirements for incorporating an OPC.
- Our experts will further guide you to choose a distinctive name (including trademark, if any) for the proposed OPC.
- Our experts will do the requisite documentation such as the preparation of the MOA, AOA and the Affidavits, as required under the incorporation procedure as laid down under the Companies Act, 2013 and the rules made thereunder.
- Our team will file all the requisite forms/ documents for incorporation with the Registrar of Companies and will follow up the status of the certificate of incorporation.
- On incorporation of the OPC, our team members will guide and assist you to ensure statutory compliances and also to obtain PAN/ TAN in the name of the OPC.
- Our team members will further guide you as to what registration(s) you need to take, whether Service Tax, VAT, Import/Export Code, etc. along with the documents related thereto.
- Our experts will offer their complete support for future statutory/ business related compliances.