ONE PERSON COMPANY

One Person Company (OPC)

How much Capital is required to Incorporate an OPC?

An OPC can be Incorporated with any amount of Capital. However, for issuing minimum shares worth Rs. 1 lakh fees must be paid to the Government (Authorized Capital fee) during the incorporation of an OPC.

How long it will take to incorporate an OPC?

An OPC can be Incorporated with any amount of Capital. However, for issuing minimum shares worth Rs. 1 lakh fees must be paid to the Government (Authorized Capital fee) during the incorporation of an OPC.

OPCs have the following benefits

  • It is considered to be a separate legal entity.
  • The liability of the members is limited.
  • OPCs allow the Transferability of shares.
  • Tax flexibility and Savings
  • One single owner has control over the Company
  • The business gets a legal status and Recognition for the business.

How to register a One-Person Company in India?

When we talk about incorporation, a One-Person Company has few restrictions. Before initiating the registration process understand the eligibility criteria of the registration process as per the Companies Act.

  • Legal entities like LLP or company can not be incorporated as OPC
  • A nominee must be appointed during the promoter
  • Also, a financial business can not incorporate as an OPC.

How to Incorporate an OPC?

Here is the process for Incorporating an OPC:

  • To obtain DSC, identity proof is required.
  • To obtain name permission, submit an application for name registration to the MCA.
  • After the name approval, fill the incorporation application with the MCA, along with a signed MOA and AOA.
  • After obtaining the Incorporation Certificate, OPC can start the process of opening a bank account.

OPC conversion into a Private Limited Company

If the OPC conversion process is not followed properly and on time, then the OPC officer of the OPC will have to pay a penalty of 5000 Rs. It can be further increased worth Rs.500every day with such irresponsible actions:

  1. Intimation of Registrar – When any OPC crosses the threshold limit of annual income, then it is necessary to inform the concerned Registrar of companies that the company should now convert itself into a Private Limited Company.
  2. Passing Board Resolution – A general meeting should be conducted by shareholders to pass the relevant resolution to increase the number of shareholders, paid-up capital, etc. Also, to appoint the required directors to meet the requirements of Private Limited Company. For a Private Limited Company, there should be a minimum of 2 directors and at least two shareholders.
  3. Application Procedure – After the completion of the above process, OPC can proceed with the registration process. The company has to file a special resolution passed by shareholders and MGT should be filed within 30 days of passing a special resolution.

OPC in India

Dr. Jamshed J Irani has introduced the One Person Company concept in India in his report on Company Law on 31 May 2005. He stated that with the growing usage of information technology and an increase in the strong service sector, the government has to encourage entrepreneurs with innovative ideas. Dr. Jamshed suggested that a person should form a specific identity with his unique idea as One Person Company, instead of merging with an association.

An entity should be exempted from all the formalities, so an entrepreneur can focus on creating value for the marketplace then dissipating his/her energy in the procedural matters.

Hence, One Person Company was introduced in 2013 in the Companies Bill with the approval of Lokh Saba in December 2012 and by Rajya Sabha in August 2013.

After getting approval from the President, it has become the Companies Act 2013.

Why Prefer One Person Company?

Here are some benefits of One Person Company:

  • The primary feature of OPC is that only one person is required to operate OPC. We can say that it is like Sole Proprietorship, where one person is responsible for the operation, controlling, and decision making.
  • As it is a registered business, a Person Company owner has all the benefits like a Private Limited Company. The legality and ownership make this type of business popular among financial institutions and banks.
  • An OPC can enjoy benefits like loans at a lower interest rate.
  • Payments made to the director are allowed for deduction under Income Tax law. Also, benefits of Presumptive Taxation are available.
  • As OPC has limited liability, entrepreneurs can take huge risks without worrying about the loss of assets. However, it is a great way for new and young entrepreneurs to start their own businesses.
    There is no need to attempt the annual general meetings. The resolution signed by the Director is sufficient.

Frequently Asked Questions

What is the role of the nominee in an OPC?

 A nominee is a member who becomes a member of the company in case of the demise of the owner or any other unfortunate event. 

What is an Authorized Capital Fee?

Authorized Capital is the number of shares of the company that can be issued to the shareholders. To issue shares, a company has to pay a certain amount of authorized capital fee to the government. 

How to speed up the Incorporation process?

For speedy incorporation, make sure your business has a unique name and all the required documents for the incorporation process.

What is a Dormant Company?

Dormant Company meaning an inactive company. However, a dormant company is a great opportunity to start a company for a future project without any significant accounting transactions.