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One Person Company

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ONE PERSON COMPANY

The Companies Act of 2013 included a number of previously unheard-of notions that fundamentally changed company regulations in India The introduction of the One Person Company concept was one of the key decision by government. This resulted in the discovery of a brand-new method of launching enterprises that offered the flexibility that a company form of entity may provide, along with the limited liability protection that partnerships or sole proprietorships did not.
According to Section 2(62) of the Companies Act, a OPC is a one person company having just one member. Moreover, a company's members are merely stockholders or subscribers to its memorandum of organization. Accordingly, an OPC is essentially a business with a single stakeholder.
These kinds of businesses are typically founded by a single founder or promoter. Due to the many benefits that OPCs provide, entrepreneurs with fledgling companies would rather establish them than operate as sole proprietorships.

The distinction between sole proprietorships and OPCs
Because they both have one individual owning the business, sole proprietorships and one-person companies may appear to be quite similar, but there are several key distinctions between the two.
The nature of their respective responsibilities is the primary distinction between the two. An OPC has its own assets and liabilities since it is a distinct legal entity from its promoter. The promoter is not held personally responsible for paying off the company's debts. However, sole proprietorships and their owners are the same individuals. Therefore, in the event that the business's liabilities are not fulfilled, the law permits the attachment and sale of the promoter's personal assets.

Key Characteristics of One Person Company

i) Private company: According to Section 3(1)(c) of the Companies Act, an individual may establish a business for any legitimate reason. OPCs are further described as private businesses.
ii) Single-member: Unlike other private limited companies and public limited companies , OPCs are only permitted to have one shareholder or member.
iii) Nominee: One distinctive characteristic of OPCs that sets them apart from other types of businesses is that, in order to register the business, the only member of the company must name a nominee.
iv) No on-going succession: An OPC only has one member, therefore upon his passing, the nominee will either accept or decline to become its lone member. Other businesses, which adhere to the idea of everlasting succession, do not experience this.
v) Number of Directors: OPCs are required to have a minimum of one director, who must be a member. Their maximum number of directors is fifteen.
vi) No minimum paid-up share capital: OPCs are not required to have a minimum paid-up capital by the Companies Act of 2013 .
vii)Special benefits: Under the Companies Act, OPCs are granted a number of benefits and exemptions that are not available to other types of businesses.

Benefits of One Person Company

Status of law

The member grants a distinct legal entity status to the OPC. The OPC is a distinct legal body that provides protection to the only person who incorporated it. The member is not held personally responsible for the company's failure; instead, their culpability is restricted to their shares. Therefore, rather than the member or director, the OPC may be sued by the creditors.

It's simple to get money

Being a private  company, OPC can easily raise money from venture capitalists, angel investors, incubators, and other sources. Instead of lending money to a sole proprietorship, banks and other financial institutions prefer to lend money to businesses. This makes it easier to get money.

Reduced compliance

Regarding compliance, the Companies Act of 2013 grants the OPC some concessions. The OPC does not require to prepare cash flow statement. The director is the only person who needs to sign the yearly returns and books of accounts, not the company secretary.

Simple registration

Since OPC only needs one member and one candidate to be incorporated, it is simple to do so. The member may also serve as the director. There is no minimum paid-up capital requirement, but OPC incorporation requires a minimum authorized capital of Rs. 1 lakh. As a result, it is simpler to incorporate than other company structures.

Simple to handle

The process of making decisions is quick and simple. The member can simply pass both regular and special resolutions by signing them and recording them in the minute book. Because there won't be any internal conflicts or delays, operating and managing the business will be simple .

Continuous succession

Even in cases where there is only one member, the OPC has the feature of everlasting succession. The single-member must designate a nominee while incorporating the OPC. The nominee will manage the business in the member's stead after their passing.

Drawbacks of One Person Company (OPC)

Only small businesses can use it.

OPC is appropriate for small business setups. The OPC is only ever allowed to have one member at a time. OPC is forbidden from raising additional funds by adding more members or shareholders. Therefore, it is not possible to add new members as the business grows and expands.

Limitations on company operations

The OPC is prohibited from engaging in non-banking financial investment operations, such as purchasing securities from corporations. It cannot be changed to become a business with the charitable purposes specified in Section 8 of the 2013 Companies Act.

Management and ownership

There will not be a clear separation between ownership and management because the solitary member may also serve as the company's director. All decisions may be made and approved by the lone member. It is difficult to distinguish between ownership and control, which could lead to unethical commercial actions.

Requirements for registering One Person Company

i) One Director and Member: The OPC can only have one owner, who may also serve as a director.
ii) Indian Resident: The owner of the OPC must be a natural person who lived in India for at least 182 days as a resident of India during the previous calendar year.
iii) Nominee: The owner is required to suggest a different person for the OPC. Additionally, the nominee must be an Indian resident. In the event of the owner's passing or incapacity, this nominee will assume control of the OPC.
iv) Reservation of a Unique Name: The owner must reserve a unique name for the business via the Ministry of Corporate Affairs' (MCA) RUN (Reserve Unique Name) web service prior to registering the OPC. According to companies act , 2013, an OPC must have "(OPC) Private Limited" in its name.
v) A single individual is only allowed to register one OPC, and in a similar vein, a person may only be a nominee in one OPC.

Incorporation process of One Person Company (OPC)

Make a DIN application

In the SPICe+ form, provide the proposed director's name and proof of address in addition to their Director Identification Number (DIN). Only established businesses have the option to use Form DIR-3. This indicates that the applicant will no longer need to submit Form DIR-3 individually as of January 2018. DIN is now available for up to three directors on the SPICe+ form.

Application for Name Approval

Selecting the company's name is the next stage in the incorporation of an OPC. The business will go by the name "ABC (OPC) Private Limited." In the Form SPICe+ application, the name may be accepted. The Form SPICe+ application can only include one preferred name and the reasons for preserving it. Another name can be submitted by submitting a new Form SPICe+ application if the first one is denied. We proceed to the following phase after the MCA approves the name.

Form Submission to MCA

Together with the Director's and professional's DSC, all the documents will be linked to the SPICe+ Form, SPICe-MOA, and SPICe-AOA before being uploaded to the MCA website for approval. When the company is incorporated, the Pan Number and TAN are automatically produced. PAN and TAN can be obtained without submitting separate applications.

Certificate of Incorporation Issue

We can start our company after the Registrar of Companies (ROC) issues a Certificate of Incorporation following verification.

Required Documents

In order to submit the following documents to the ROC, we must prepare them:
i) The Memorandum of Association (MoA), which outlines the goals the firm will pursue or the purpose for which it will be incorporated.
ii) The company's operating bylaws are outlined in the Articles of Association (AoA).
iii) Since there is only one director and one member, a candidate must be nominated on their behalf. This is because, should the director become incapacitated or pass away and be unable to carry out his responsibilities, the nominee will step in and take his position.
iv) His PAN and Aadhar cards would be taken with his approval on Form INC-3.
v) Evidence of the proposed company's registered office, ownership documentation, and an owner's NOC.
vi) The proposed director's declaration and consent are on Form INC-9 and DIR-2, respectively.
vii) A statement from the expert attesting to the fact that all compliances have been made.

  • FAQ
1. What is a One Person Company (OPC)?

A company with just one stakeholder is known as a One Person Company (OPC). It was created in accordance with the Companies Act of 2013 to give those who seek to operate a limited liability company without involving several shareholders a more straightforward business structure.

An OPC can only be formed by a natural person who is a citizen of India and resides in India. Furthermore, each individual can only create one OPC at a time.

Since it's a one-person company, the minimum number of members is one. The maximum number of members is one, however in the event of the lone member's incapacity or death, a nominee must be in place to take over.

When the OPC is incorporated, the sole member appoints the nominee, who must also be an Indian citizen and a resident of India. In the event of the original member's death or disability, the candidate will take over as the only member.

The member's responsibility is capped to the capital they have contributed to the business. It indicates that aside from their investment in the business, only one member's personal assets are safe.

No, an OPC can have only one director at the moment of incorporation. Nonetheless, a minimum of one director is required, and a maximum of 15 directors may be present.

No, annual general meetings (AGMs) are not held by OPCs. Resolutions may be passed by the lone member by putting them in writing.

i) OPCs must nevertheless submit their annual financial statements to the Registrar of Companies (RoC) even though they are exempt from some compliance requirements.
ii) Select an auditor.
iii) Keep the required books and registrations up to date.
iii) Submit to the Ministry of Corporate Affairs' (MCA) yearly return.

The Companies Act of 2013 does not specify a minimum capital requirement. Nonetheless, the lone member must determine the company's nominal share capital.

No, an OPC is not permitted to raise money from the general public or offer shares to the general public. It is a privately held business with little funding.

The nominee chosen at the time of incorporation assumes the role of the only member in the event that the OPC's sole member passes away. In the absence of a nominee, the OPC will be regarded as a regular business and subject to the standard rules set forth in the Companies Act.

OPCs pay private limited company taxes. They must pay corporation tax rates that are determined by their income and other laws that apply to businesses. If an OPC's yearly turnover surpasses the threshold, they also have to pay the Goods and Services Tax (GST).

i) Liability: In a sole proprietorship, the owner's liability is unlimited, while in an OPC, it is restricted to the company's capital.
ii) Regulation: While sole proprietorships are subject to different rules depending on the nature of their business, OPCs are governed by the Companies Act of 2013.
iii) Legal Entity: A sole proprietorship is not regarded as a distinct legal entity from its owner, although an OPC is.

No, according to the Companies Act of 2013, only Indian citizens and residents are permitted to form an OPC. Members or nominees of an OPC cannot be foreign nationals.

i) The member's liability is capped at the amount of their capital contribution.
ii) Separate Legal Entity: The OPC and its members are two different legal entities.
iii) Less Compliance: In contrast to both private and public enterprises, OPCs are subject to fewer compliance standards.
iv) Sole Control: The member is in total command of the company.