What is One Person Company?

One person company is relatively a new concept. Basically it is a private company which can be formed by a single person (i.e. single shareholder). It’s a hybrid form of Private Limited and Proprietorship. It has some advantage of Private Limited Company and some advantages of Proprietorship Company

If you are familiar with the concept of a Private Company then you must be knowing that to start a private company there must be minimum 2 shareholders and 2 directors.

However most of the time we see the entrepreneurs do not want / don’t have any other person to be the part of their own businesses. But at the same time, they also want to enter into corporate world and get the advantage of being a body corporate. In such situation one can certainly opt for One Person Company.

One person company is a new way to start your own business in the corporate world with minimum manpower and compliances. So far now it has encouraged small business houses from various sectors like doctors, engineers, small manufacturers, small traders etc. It has also covered the areas like handloom, handicrafts, pottery and this is helping them to give a formal structure to their businesses and enter into the corporate world. This form of company is best suitable to service professionals, consultants etc.

Minimum Requirements for One Person Company?

  • One Person Company is formed as a private company.
  • One Person Company can have only one person as a member.
  • It shall have a minimum of one director
  • It shall have at least one person as a nominee. Such Nominee will become the owner of the OPC in case of ineligibility of death of the sole member.
  • It shall be formed for any lawful purpose. That means object and activities of the company should not be illegal.
  • Name of OPC shall include the words OPC written in bracket for e.g. ABC PRIVATE LIMITED (OPC).

WHAT YOU WILL GET?

  • DIN for 1 Directors

  • DSC for 1 Directors

  • Company Name Approval

  • MOA + AOA

  • Incorporation Certificate

  • Company PAN

  • Company TAN

What We Need?

For Shareholders/Directors

  • PAN Card (Mandatory)
  • Aadhar Card (Mandatory)
  • Address Proof (Bank Statement, Mobile Bill, Telephone Bill)
  • Identity Proof (Passport, Driving License, Voter ID)
  • Passport size photo (scan copy)

For Registered Office

  • Ownership Proof (Electricity Bill etc)
  • Utility Bill (Gas Bill, Electricity Bill)
  • NOC (Download format)

What is the Process?

Incorporation as per One Person Company (Second Amendment) Rules to be applicable from 2nd October, 2018:

Application for reservation of name

One can reserve the proposed name of the company through web-based application called RUN (Reserve Unique Name) for Company Registration.

It is to be noted that the name of OPC ends with the words OPC written in bracket for e.g.ABC PRIVATE LIMITED (OPC).

Application for Incorporation

Option – I

Incorporation through new Form FiLLiP (Form for incorporation of Limited Liability Partnership) WITHOUT filling Reserve Unique Name application, combining therein 3 services viz

  • Name reservation,
  • Allotment of Designated Identification Number (DIN),
  • Incorporation of New Company
  • Allotment of PAN and Allotment of TAN) in one form

Option – II

Incorporation through SPICe (With filling Reserve Unique Name application):
In this, one can reserve the name of proposed OPC through web based service called RUN (Reserve Unique Name application).

Incorporate OPC: After name approval through RUN, Form SPICe shall be filed for incorporation of the OPC within 20 days from the date of approval of RUN. This time one can apply for following services through SPICe:

  • Allotment of Designated Partner Identification Number (DPIN/DIN),
  • Incorporation of New Company
  • Allotment of PAN and Allotment of TAN

Attachments:

  • Memorandum of Association.
  • Articles of Association.
  • Proof of identity of the member and the nominee.
  • Residential proof of the member and the nominee.
  • Copy of PAN card of member and nominee.
  • Consent of Nominee.
  • Affidavit from the subscriber and first Director to the.
  • List of all the companies (specifying their CIN) having the same registered office address, if any.
  • Proof of Registered Office address (Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts).
  • Proof that the Company is permitted to use the address as the registered office of the Company if the same is owned by any other entity/Person (not taken on lease by company)
  • Consent from Director.

Once the Form is processed and found complete, a company is registered and Corporate Identity Number (CIN) is allocated to the company through Incorporation Certificate. This incorporation certificate is a proof that all the requirements for formation of the company have been fulfilled.

Why or Why not One Person Company?

Advantages of OPC

  • Separate legal entry  :
    One Person Company gets recognition as a separate legal entity and thereby it gives an entrepreneur all the advantages of the company. For e.g. limited liability, legal protection, easy credit, bank loans, access to market.
  • Lesser Compliance :
    The compliances for a one person company are much lesser in terms of filing returns, balance sheets, meetings, audit etc. as compare to that for other form of companies.
  • Fast decision :
    As there is only owner of the company, it is easier to make fast decisions and avail the advantage of visible opportunity in time.
  • Concentrated business activity :
    Lesser compliances make it favorable to concentrate on core business of the company.
  • Business secrecy :
    Owner of OPC doesn’t have to share or sacrifice the business formulae / business secrets e.g. Product mix, software coding.
  • Ownership :
    OPC enjoys the benefit of complete ownership as there is a single member.
  • Successor :
    One can chose his successor to carry his business on very first day.
  • No disputes:
    Being single owner company there is no chance of any disputes between members.
  • Expertise of directors :
    Though it is a single person company, it can have as many number of expert directors on its board without losing privacy of the business.
  • No AGM :
    OPC doesn’t need to hold an Annual General Meeting.
  • Number of member :
    Only one person as member is required.
  • Number of director :
    Minimum one and maximum can be 15 directors.
  • No Independent director :
    OPC doesn’t need to appoint Independent directors on its Board.
  • Retirement by rotation :
    Retirement of directors by rotation is not applicable.

Disadvantages of OPC

  • Lock in Period :
    In case a LLP fails to file its Annual Return or Statement of Accounts and Solvency, penalty of Rs.100 per day per form is applicable.
  • Turnover and Capital Restriction:
    If the paid up share capital of such OPC is increased beyond INR 50 Lakh AND its average annual turnover during the relevant period exceeds INR 2 crore, such OPC has to be COMPULSORILY converted in Private or Public Company. So we can say it has a limited life.
  • Business Restriction:
    OPC cannot be incorporated or converted into a non-profit making company under section 8 of the Companies Act. OPC cannot carry out non-banking financial investment activities including investment insecurities of any other body corporate.
  • Life of OPC :
    At any point of time the given criteria is triggered, the OPC loses its status and has to compulsorily get converted into private or public company.
  • Single handed decisions :
    As major decisions are concentrated with single person, the business decisions may get delayed due to unavailability of that person.All decisions will be taken from the perception of single person and thereby may lose the advantage of other’s expertise.
  • Mandatory Nomination :
    Though OPC is a single person entity, every OPC is obligated to nominate a person as a nominee at the time of incorporation only.

Compare with other options?

Headings OPC Sole Proprietorship Private Company LLP
Governing Law Companies Act Shop & Establishment Act Companies Act Limited Liability Partnership Act
Separate Legal Existence Have Separate Legal Existence Doesn’t have Separate Legal Existence Have Separate Legal Existence Have Separate Legal Existence
Liability of Owner Limited, if OPC limited by shares or guarantee Always unlimited Limited, if company is limited by shares or guarantee Always limited
Classification Limited by shares or limited by guarantee or unlimited No such classification Limited by shares or limited by guarantee or unlimited No such classification
Threshold Limit Paid up share capital upto INR 50 Lakh and average annual turnover upto INR 2 crore. No such limit No such limit No such limit
Compulsory Conversion Compulsory Conversion beyond threshold limit No such restriction No such restriction No such restriction
Lock in period Cannot voluntarily be converted for 2 years of incorporation No such restriction No such restriction No such restriction
Nominee Requirement Yes. Compulsory Not required Not required Not required
Taxation 25% as private limited company (subject to conditions) Income of the proprietorship is treated as the income of the and taxed accordingly. 25% for some companies (subject to conditions) 30%
Succession Nominee Legal heir or by will Shareholders are the real owners According to LLP agreement
Number of Members Only one Only one Minimum 2, Maximum 200 Minimum 2 partners
Directors Minimum 1, Maximum 15 — Minimum 1, Maximum 15 Minimum 2 designated partners
Ownership Single member Owner Shareholders Partners
Name Suffix (OPC) No restriction Suffix Private limited or Private company Suffix LLP
Transferability of shares Part Transfer not possible, only 100% allowed Can sell the business in totality Can transfer partly or fully Can transfer partly or fully
Agreement AOA, MOA AOA, MOA AOA, MOA LLP Deed
Capital Share Capital In form of cash and infrastructure only Share capital Contribution by Partners
Annual Filings Income tax and ROC filing Income tax filing of the owner of proprietorship Income tax and ROC filing Income tax and LLP annual filing
Board Meeting Not required if only one member else at least 2. No such Requirement Minimum 4 meetings. No such requirement.

After incorporation of One Person Company?

  • Opening OPC Bank Account within 30 days of Incorporation.
  • Depositing of share capital money into bank account within 60 days of Incorporation.
  • Issue of share certificate within 2 month of Incorporation
  • Disclosure of interest by director/s in first board meeting after incorporation.
  • OPC is required to file a copy of the financial statements duly adopted by its member, along with all the required documents, within 180 days from the closure of the financial year.
  • One Person Company must file Annual Accounts and Annual Return with the Registrar of Companies each year. OPC should file its annual return within 60 days of the event of AGM.

FAQ?