The concept of One Person Company (OPC) in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. Section 2(62) of Companies Act defines a One Person Company as a company that has only one person as its member. In a general sense, members of a company are nothing but subscribers to its memorandum of association, or its shareholders. So, an OPC is effectively a company that has only one shareholder as its member.
Such companies are generally created when there is only one founder/promoter for the business.
Entrepreneurs whose businesses lie in early stages prefer to create OPCs instead of sole proprietorship business because of the several advantages that OPCs offer. Since an OPC is a separate legal entity distinguished from its promoter, it has its own assets and liabilities. The promoter is not personally liable to repay the debts of the company.
- The first step in registration is checking the availability of the proposed company name and selecting up to six names in order of preference.
- Once the proposed name is approved or is available, we shall apply for OPC registration.
- Digital Signature Certificate (DSC) will be required for form submission; it is advisable to obtain DSC, if not available.
- Director Identification Number (DIN) is mandatory; it is advisable to obtain DIN if a Director does not have one.
- OPC is incorporated within 10 – 15 business days from date of application.
- Proposed name of the company and the list of activities that the company will be engaged in.
- Suitably drafted Memorandum of Association (MOA) and Articles of Association (AOA), duly stamped with payment of stamp duty and signed.
- Address proof of the place of business of the OPC (Rent agreement in case of rented premises, Index II or property tax paid receipt, etc. in case of owned premises).
- Details of nominee and nominee’s consent.
- Identity proof of the sole shareholder, director(s), and nominee for the sole shareholder. (Passport, Voter ID, Driving License, Aadhar card).
- Address proof of the sole shareholder, director(s) and nominee for the sole shareholder (Should be in their name) (Any one of Bank Statement, Electricity
- Bill, Telephone Bill, Mobile Bill, Rent Agreement in case of rented premises).
- The initial capital of the company.
- PAN Card and other address proof of Director and Nominee.
- Affidavit and consent of Director
1. Can there be more than one shareholder in an OPC?
There can be only one shareholder in an OPC and there should also be a nominee for the sole shareholder.
2. What is the role of a nominee?
A nominee is a person who shall become the shareholder of the OPC in case of death, disability of the original person to act as the sole shareholder of the OPC. The nominee should be an Indian citizen and should be residing in Indian.
3. Can a person incorporate more than one OPC’s?
A person shall not be eligible to incorporate more than one OPC or become nominee in more than one OPC.
4. Can the OPC be converted into any other type of company?
An OPC can be converted into any other type of company (Except section 8 Company) only after two years from the date of incorporation of the OPC.
5. Who can register an OPC?
As per the specifications of the Ministry of Corporate Affairs, an Indian resident can register an OPC, and that, too, only one at a time.
6. How much capital is required to start an OPC?
For registration of an OPC, an authorized capital of Rs. 1 lakh is required 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.
7. Who is eligible to act as a member of an OPC?
Only a natural person who is an Indian citizen and resident in India shall be eligible to act as a member and nominee of an OPC.
8. Is there any tax advantage on forming an OPC?
There is no specific tax advantage to an OPC over any other form. The tax rate is flat 30%, other tax provisions like MAT & Dividend Distribution Tax applies as they apply to any Other forms of company.
9. Is there any threshold limits for an OPC to mandatorily get converted into either private or public company?
In case the paid-up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into a private or public company.
10. What is the mandatory compliance that an OPC needs to observe?
The basic mandatory compliance are:-
- At least one Board Meeting in each half of calendar year and time gap between the two Board Meetings should not be less than 90 days.
- Maintenance of proper books of accounts.
- Statutory audit of Financial Statements.
- Filing of business income tax returns every year before 30th September.
- Filing of Financial Statements in Form AOC-4 and ROC Annual Return in Form MGT.
11. Who cannot form a One Person Company?
- A minor shall not eligible becoming a member
- Foreign citizen
- Non Resident of India
- Any person incapacitated by contract
12. How do I convert an OPC to a Private limited company?
Mandatory Conversion of One Person Company (OPC) to Private Limited Company (PLC) is required in case a One Person Company meets certain parameters, like:
- The effective date of the increase in the paid-up share capital of a One Person Capital beyond rupees fifty lakhs,
- An increase in average annual turnover during the period of immediately preceding three consecutive financial years is beyond rupees two crores.
- In the above case, the One Person Company shall be mandatorily required to convert itself into either a private or a public company within a period of six months.