What is One Person Company Meaning ?
One person company as a company which has only one person as a member. This paradigm shifts from the Companies Act 1956, where minimum two members are required float private limited company as well as public company.
For the 1st time the concept of One Man Company or OPC has been introduced in India under Companies Act 2013 and the intent is apparently to permit entrepreneurship of a single individual to obtain the benefit of a corporate form of organization. This concept has opened huge business opportunities for small entrepreneurs.
A single individual forms a company satisfying all the legal requirements of the law for a definite purpose, usually for profit making. It has only one person as a member who will be promoter and director of the company. Hence it is a single shareholder corporate entity, where legal and financial liability is limited to the company only
What is One Person Company Registration ?
Under companies act 1956 minimum two members were required for the formation of Private Limited Company Registration. This was a hindrance to entrepreneurs who wanted to go solo or do business alone. So, the only option available was sole proprietorship firm. The major problem with doing business as a sole proprietorship firm is that it does not have a separate legal entity and has unlimited liability. OPC is a legitimate way to form a company with only one member. It can work like proprietorship, but it holds the status of the company and of course, it enjoys the benefit that comes with it i.e. limited liability. Although an OPC comes under a private company, it has been given many exemptions and thus has a comparatively lesser compliance burden.
The Minimum number of directors is limited to one and only one director can sign the financial statement and the Board’s report
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What is OPC Registration Govt Cost ?
In case of OPC having nominal share capital more than Rs. 10,00,000 fees of Rs. 2000 and Rs. 200 for every 10,000 of nominal share capital after first 10,00,000 to Rs. 50,00,000. The registration of OPC generally takes 20-30 days approximately and after registration, you receive a certificate of incorporation of OPC.
OPC Stand’s For ?
OPC Definition stands for One Person Company, as you can in above paras that one person company is a company which is incorporated by one person. OPC is a short name for One Person Company so don’t get confused with them.
Minimum Requirements for One Person Company Registration?
a) Minimum 1 shareholder
b) Minimum 1 director (director and shareholder can be same person)
c) Minimum 1 nominee
d) Shareholder/nominee to be Indian resident
e) Minimum authorized share capitals. 1 lakh
f) Digital signature certificate for director
g) Director identification number for the director
Nomination in case of One Person Company
1) The memorandum of OPC shall indicate the name of the other person who has given his consent in the prescribed form to be so named and who shall, in the event of the member becoming incapacitated due to death or incapacity to contract, become the member of the company.
2) The written consent of such other person shall also be filed along with the incorporation documents while forming OPC.
3) The memorandum of the company shall state the name of the person who in the event of the death of the subscriber shall become a member of the company.
4) The member has powers at any time to change the name of the nominee by giving notice in the prescribed form.
5) The new nominee should also give his consent to his name so appearing and any change in the nominee shall require amendment in the memorandum of association.
6) He must be a natural person Indian citizen resident in India and not a minor
A nominee can withdraw his nomination by giving his consent to the member and the OPC. In that case, the member shall nominate another person within 15 days of the notice of withdrawal after obtaining his written consent and send intimation of such nomination to the company. The OPC is required to file the notice of withdrawal of consent and fresh nomination within a period of 30 days from the notice of withdrawal
Documents Required for OPC Registration
a) Copy of passport/Pan card/Voter ID/ Driver’s License of the Director
b) Copy of statement of current bank account/ mobile or electricity invoice of Director
c) Passport size photo of director
d) Copy of autograph of director
e) No objection certificate for registered office of OPC
f) Rental Agreement/ Sale deed of the Registered office of the Company
One Person Company (OPC) Registration Process
The process of incorporation of a one-person company is a very simple one.
1) First the sole shareholder shall get a Director Identification Number (DIN) as well as a digital signature certificate.
2) Then he should apply for the name of the company
3) After that he should get the consent of the nominee in the prescribed forms.
4) Then he shall file the consent along with the final incorporation forms with the Memorandum and Articles and other required documents
5) After that he shall receive the final incorporation certificate from the register of companies. Now he can commence business under the name.
6) Apply for the PAN Number and open a current bank account on the name of one person company.
Advantages of One Person Company Registration
Features of One Person Company are:
1) there shall be only one member.
2) It is run by individual yet OPCs are a separate legal entity like that of any registered corporate.
3) A One Person Company is incorporated as a private limited company.
4) It must have only one member at any point of time and may have only one director.
5) The member and nominee should be natural persons, Indian Citizens and resident in India.
6) One person cannot incorporate more than one OPC or become a nominee in more than one OPC.
7) OPC to lose its status if paid up capital exceeds Rs. 50 lakhs or average annual turnover is more than 2 crores in three immediately preceding consecutive years.
8) No minor shall become member or nominee of the One Person Company or hold share with beneficial interest.
For the more details regarding the advantages of One Person Company Checkout Here
How to Choose Name in One Person Company Registration?
As you can in the above article that you can choose a name for your one person company during its registration by way of filing an incorporation form or you can take service of WEB-RUN services available on the website of Ministry of corporate affairs. Here is the guide on One Person Company Name Example.
Timeline for OPC Registration
One Person Company takes minimum 10-15 days of the Incorporation. Its a general timeline for the OPC Registration in India.
What are the tax rate in case of One Person Company ?
Income Tax act, 1961 does not provide any special recognition of OPC and is considers as a private company for the purposes of taxation. Thus, under the tax rate slab, OPC’s income is taxed at 30% of its total income in financial year. This is somewhat higher than the tax slab rate for individuals which is 10% to 30% of the income depending upon the income of such individual.
What is annual compliance for One Person Company ?
1) Form AOC-4 for financial statement
2) MGT-7 for an annual return
3) Meeting of board at least twice in a year
for the more details on the Compliance you can check here about Annual Compliance for One Person Company
FAQ on One Person Company
1. Who can Become Partner in One Person Company?
Any individual can become a partner in One Person Company unless of unsound mind, insolvent person or proceeding for insolvency is pending against a person.
2. Can NRI (Non-Resident of India) start an OPC?
Only a natural person who is an Indian citizen and a resident in India is eligible to incorporate a One Person Company or be a nominee member. The Director or Nominee must also be over 18 years of age.
3. What is OPC Registration?
OPC registration is an important thing, without registration you are not allowed to incorporate a One Person Company. As you can see in the above article that registration is important for legal proof and registration will make your OPC as legal entity. The registration process is above mentioned you can check above. The process is very simple and you can apply online for its registration.
4. What is the Minimum Number of Partners in OPC?
As above mentioned, One Person can start with minimum of 1 person.
5. Why OPC preferred by individuals
a) Compliances are low
b) Easy to incorporate
c) Fee and expenses are less
d) Body corporate
e) Limited liability
6. Is it cheaper as compare to Private limited company
Yes incorporating a private company involves more cost and compliances to be followed under the companies act, 2013.
7. What is MOA and AOA?
MOA is a memorandum of association and AOA is an article of association, these are important documents of a company.
8. Who can incorporate a one person company?
Only a natural person who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company and shall be a nominee for the sole member of a One Person Company.
“RESIDENT IN INDIA” means a person who has stayed in India for a period of not less than 182 days during the immediately preceding 1 calendar year.
9. Whether a person shall form more than 1 one person company?
No, a person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company
10. Whether a minor become a member of OPC?
A minor shall not be eligible to become a member or nominee of the One Person Company or can hold share with beneficial interest.
11. Whether an OPC can carry out NBFC activities?
OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of anybody corporates.
12. Is OPC suitable for medium & large business?
No. OPC is suitable only for small business. OPC can have maximum Paid up share capital of Rs.50 Lakhs or Turnover of Rs.2 Crores. Otherwise OPC need to be converted into Private Ltd Company.
13. Is there any maximum time limit for conversion of OPC ?
Yes. One person Company cannot be converted voluntarily into any kind of company unless two years is expired from the date of incorporation, except threshold limit (paid up share capital) is increased beyond 50 lakh rupees or its average annual turnover during the relevant period exceeds 2 crore rupees.
14. Is it mandatory to nominate a person during incorporation ?
The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
15. Whether it is mandatory to mention the name of the nominee in MOA?
Yes. The name of the person nominated shall be mentioned in the memorandum of One Person Company
16. Is it mandatory to mention the word OPC in all the documents?
The word OPC shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.
17. Is it mandatory to intimate withdrawal of consent by nominee to the Company?
The person nominated by the subscriber or member of a One Person Company may, withdraw his consent by giving a notice in writing to such sole member and to the One Person Company.
18. How many days time period for nominating another person as nominee?
The sole member shall nominate another person as nominee within 15 days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person.
19. What is the maximum time period for intimation to Registrar about withdrawal and appointment of nominee?
The company shall within 30 days of receipt of the notice of withdrawal of consent has to file with the Registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member and the written consent of such another person.
20. What is the procedure for issue of Share Certificate?
Every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of and signed by one director or a person authorized by the Board of Directors of the company for the purpose and the Company Secretary, or any other person authorized by the Board for the purpose.
21. In case of event of death of member, who will be the member of OPC ?
Where the sole member of OPC ceases to be the member in the event of death or incapacity to contract and his nominee becomes the member of OPC, such new member shall nominate within 15 days of becoming member. The company shall file with the Registrar an intimation of such cessation and nomination within 30 days of the change in membership and with the prior written consent of the nominee.
22. What is the maximum Penalty for defaulting the provisions?
If OPC or any officer of such company contravenes the provisions of Companies (Incorporation) Rules 2014, they shall be punishable with fine which may extend to 10,000 rupees and with a further fine which may extend to 1,000 rupees for every day after the first during which such contravention continues. “One person company (concept) is quite revolutionary… This will give the individual entrepreneurs all the benefits of a company “ Hon’ble Minister of Corporate Affairs- Sri. Sachin Pilot
23. When will be OPC to convert itself into a public company or a private company?
Where the paid up share capital of an OPC exceeds 50 lakh rupees or its average annual turnover during the relevant period exceeds 2 crore rupees, it shall cease to be entitled to continue as a OPC.
24. Is there any time limit for conversion of such OPC ?
Such One Person Company falling under above mentioned criteria shall be required to convert itself, within 6 months of the date on which its paid up share capital is increased beyond 50 lakh rupees or the last day of the relevant period during which its average annual turnover exceeds 2 crore rupees as the case may be, into either a private company with minimum of two members and two directors or a public company with at least of seven members and three directors in accordance with the provisions of section 18 of the Act.
25. Is it mandatory to alter Memorandum and Articles for giving effect to Conversion?
Yes. It is mandatory to alter its memorandum and articles by passing a resolution and to give effect to the conversion and to make necessary changes incidental thereto.
26. Whether prior intimation to Registrar is required for ceasing the status of OPC?
Yes. The OPC shall within period of 60 days from the date of applicability of sub-rule (1), give a notice to the Registrar and informing that it has ceased to be a OPC and that it is now required to convert itself into a private company or a public company by virtue of its paid up share capital or average annual turnover.
27. Is it mandatory to get signature from PCS in Annual Return for OPC ( Section 92)?
The Annual return shall be signed by the Company Secretary or where there is no company secretary, by the Director of the Company.
28. Is it mandatory to comply the provisions of General Meetings ?
The provisions relating to Board Meeting, Annual General Meeting, Extra Ordinary General Meeting and Notice Convening General Meeting are not applicable to One Person Company.
29. Is it mandatory to maintain Minutes book for OPC?
Yes. The resolution by such director is entered in the minutes book required to be maintained under Section 118 and signed and dated by such director and such date shall be deemed to be the date of the meeting of the Board of Directors.
30. Is it mandatory to file financial statements ?
Yes. The Company shall file a copy of the financial statements duly adopted by its members along with all the documents which are required to be attached to such financial statements, within 180 days from the closure of the financial year.
31. Is it mandatory to record in Minutes about every contract ?
Where OPC limited by shares or by guarantee enters into a contract with the sole member of the company who is also the director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer are contained in a memorandum or are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract. It is not mandatory for the contracts entered into by the company in the ordinary course of its business.
32. Is it mandatory to inform Registrar about every contract ?
The company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors within a period of 15 days of the date of approval by the Board of Directors.
33. Is it mandatory to prepare Cash Flow Statement?
No. Cash Flow Statement is not mandatory for OPC Companies
CONCLUSION on One Person Company
It can encourage business venture and makes better use of market resources. This new concept may lead to people forming companies to generate profits themselves leaving the liability to the company and washing their hands of any liability.
Though the one-person company will help a lot of individual entrepreneurs who want to open their own firm, it certainly has some loopholes. To implement it fully and beneficially we must correct the law and implement it. The silver lining of OPC, however, is that most restrictive clauses exist not in the Companies Act but the Rules, allowing for the possibility of quick amendments from the government.
In simple, it is just a characteristic attached to sole proprietorship business by registering it to search for better market, economic and management opportunities despite many disadvantages