If you are someone who has a business idea in his mind and has already started his journey towards developing the idea and giving it the shape of a business, and intend to become your boss without anyone , then the framework of One Person company is an ideal one for you.
One Person Company is a special situation of a private limited company that allows incorporation of a business with a sole member. This concept is particularly new in India, and was not available before the introduction of Companies Act 2013.
The Companies Act 2013 allows incorporation of a public limited company with at least seven members with at least 3 directors, whereas there is requirement of at least 2 members and 2 directors. However, for the first time in Indian history, the concept of One Person Company was allowed with the objective of encouraging entrepreneurship & consequent development of the economy.
One Person Company can be incorporated by-
- Any natural person who holds Indian citizenship and is a resident in India.
- Is not disqualified to incorporate a One Person Company under the laws of India.
- Has an additional individual who can act as nominee for OPC and such individual cannot act as a nominee for a company other than the OPC.
One Person Company Registration With Legalmart
Incorporation of an OPC happens with various stages such as name approval, preparation of MOA & AOA, e-fillings, nomination filling etc. which can be rigid for any business man unaware of the processes, fees and time involved in the process. Therefore, expert assistance sites like Legalmart.com can help you to provide expert assistance in preparation of documents, form filling and getting certificate of incorporation for the same.
Let’s first get to know a little about OPC in India.
Benefits Of One Person Company Registration
- Limited Liability– There are equal chances of risks and profits in a business and any unfortunate event can come at any time and could make a business insolvent. Therefore, it is important to safeguard the personal assets of the sole owner from any such unforeseen events, and this could happen in case of businesses like sole proprietorship business. However, OPC has the benefit of limited liability which reduces all such unnecessary worries. This is one of the greatest benefits of adopting OPC is it allows limited liability towards the business liabilities of the sole owner of the business unlike sole proprietorship business where the liability of the proprietor is unlimited. Thus, the sole owner can confidently balance business risks without stressing about any probable losses of his business assets.
- Tax Flexibility & Savings– One Person Company includes the benefits and incentives offered by the Government of India which includes benefits provided to Small Scale Industries (SSI) to MSMEs such as easier funding processes from banks, bank loans at lesser rates, benefits accruing to OPCs under Foreign Trade policies, tax benefits and deductions such as deduction for any director’s remuneration paid to the director shall be eligible for deduction under Income Tax Act 1961 which is not available for entities like sole proprietorship business. Similarly, OPCs are also eligible to receive tax deduction on the basis of presumptive taxation under the income tax act.
- Easier Funding Processes– Unlike other entities, it is easier in the business structure of a private company or OPC to receive funding for business purposes through venture capitalists, angel investors, or any financial institutions like Non-Banking Financial Companies etc.
- Better decision making with Sole ownership-As said before, sometimes it is easier for the sole business owner to make decisions on his own in behalf of the business entity, as it is difficult to handle different opinions and further to reach one final decision for the business. Thus, having a sole member has the benefit of quick decision making, lack of any interference, and thus better decision making.
- Better Business Recognition and Market Value–OPC having the status of a body corporate having perpetual succession, limited liability, tax benefits and easier funding processes help them to create and maintain better market recognition for their businesses as compared to sole proprietorship businesses. The business status of OPCs also helps them in procurement of business tenders, trust & faith among suppliers and customers in the business including corporate designations such as directorships which are not possible in sole proprietorship business.
- Fewer Compliances & Flexible Procedures –For encouraging innovations and inculcating the spirit of entrepreneurship, the Government of India has prescribed numerous benefits including fewer compliances and flexible procedures as compared to any other form of entity. For instance, an OPC is not required to hold any Annual general meeting, flexibility in terms of lesser board meetings, exemption from preparation of cash flow statements, no requirement of signing of books of accounts & annual returns by any company secretary but by the director authorized for this purpose.
- Interests in case of late Payments– OPC has also been allowed to receive the benefits bestowed on micro, small & medium entities under the MSME Development Act, 2006. According to which even if the newly incorporated OPC is either a micro, small, or medium, in size of the business, they are in receipt of interests on late payments where which is almost three times the bank rate.
How to Register a One Person Company
- Incorporation of OPC is permitted under Indian Laws- The Companies Act 2013 allows incorporation of an OPC like other entities with varied requirements of members and directors on a mandatory basis. Where in a public company, there must be at least seven members with at least three directors, in case of private company there should be at least two members with at least two directors. But the Government has eliminated all this conditions in case of OPC, whereby a sole member with minimum one director is granted incorporation under the provisions of the Companies Act. However, such sole member can only incorporate such one OPC at one time and not more than one OPC at any point of time till the time such OPC is existing.
- Incompatible for High Turnover entities and needs conversion-
Though, the Government of India has allowed multiple benefits and incentives attached with OPCs in India. However, OPCs come with certain restrictions and conditions including-
- One Person Company cannot convert itself into any other form of business entity until a total period of two years has been elapsed from the date of incorporation.
- However, where the One Person Company holds a share capital above Rs. 50 lakhs and holds a yearly turnover of more than 2 years in the immediately previous three consecutive financial years then it cannot hold itself in such high turnover and share capital value and needs immediate conversion into a private or a public company by fulfilling necessary requirements.
- One Person Company can never be converted into a Not-for-profit association or a section 8 company. However, it can do so after it is converted into a private limited company.
Read More About: “How to Register Public Limited Company“
Documents Required For Registration
- Copy of KYC- Aadhar/ Voter’s ID/ Passport/ Driver’s License.
- Copy of PAN card of the owner.
- Passport- sized photographs of the sole owner of the business.
- Copy of Rent Agreement (in case the property is rented).
- No Objection certificate from the landowner.
- Address Proof -Latest Bank Statement/ Telephone or Mobile Bill/ Electricity bill.
- Proof of the address of the registered office of the proposed OPC such as Registered Electricity Bill along with Rental Agreement (in case the property is being taken on rent) or Sale Deed(where property has been purchased).
- Documents from Director/member and elected nominee.
Process Of Registration Of One Person Company
Step 1: Acquiring A Digital Signature Certificate (Dsc)
Before initiating the process of registration, the proposed OPC is required to obtain a Digital Signature Certificate for the proposed sole director of the company for logging on to the Government portal that grants certificate of incorporation to the business i.e. Ministry of Corporate Affairs. For obtaining the same, following information is required to be submitted-
- Address Proof the Proposed director.
- Identification proof of the Director i.e. Aadhaar Card/PAN card/Driver’s License etc.
- Passport sized photo.
- Email& Phone no.
Step 2: Apply & Get Alloted A Director Identification Number
After getting the Digital Signature Certificate, the proposed director can log on to the MCA portal and can apply for Director Identification Number (DIN) in the proposed form SPICe Form along with certain information such as address and identification proof.
With effect of the notification provided in 2018 by the MCA “there is no requirement of separate application for DIN allocation for a newly incorporated business, but needs to be applied along with the incorporation form for up to 3 directors as an OPC can have up to 15 directors in its board as the maximum upper limit.
Step 3: Application For Approval Of Name
After the application of DIN number allocation, the next step involves approval of name of the company which must include …………..OPC Private Limited with the proposed name of the company in the form SPICe+ 32 application.
Form Spice+ 32 involves mention of the name of the proposed OPC including reasons for adopting the same and there is a provision to allow name approval by filling the same form for a second name if the first name gets rejected due to some reason. On getting the name of the proposed OPC approved, next step involves preparation of documents.
Step 4: Preparation Of Documents
Following are the documents that are required to be prepared and filed with the application for the incorporation of proposed LLP-
- Memorandum & Articles of Association of the OPC which include the main objectives behind the incorporation of the business and the other including the internal rules & regulations of the business necessary for the conduct of business operations.
- Choosing a nominee and getting his consent in for INC-3, who must be a natural person and nominating such natural person to act on behalf of the sole member in case such sole member in incapacitated to act as a sole member of OPC.
- Address Proof the proposed company office and in case the property is rented then Proof along with the proof of ownership and a NOC from the owner.
- Consent of the proposed director to act as director for the proposed business and a declaration to the same effect respectively.
- Declaration by a professional (CS/CA/CWA/ advocate) that the proposed company has completed all compliances for the purpose of incorporation.
STEP 5: FILING OF FORMS WITH MCA
After preparation of all these documents and filling and attaching them with forms including SPICe Form, SPICe-MOA and SPICe-AOA along with the DSC of the Director and the professional, all these documents shall be uploaded to the MCA portal for the purpose of incorporation.
Along with these, the PAN number (Permanent Account Number) and the TAN (Tax Deduction Account number) will be generated and there will not be any further requirement of any separate application for the generating the same.
Step 6: Issue of the Certificate Of Incorporation
On receipt of application for OPC incorporation and after undergoing thorough verification of the same, the Registrar of Companies will grant a certificate of incorporation to the OPC. On completion of the registration process, it shall be mandatory for OPC to use “OPC” after the name of the company in every official document or at the registered address of the company.
Time Involved In The Process Of OPC Registration
Incorporation of an OPC is a long process that requires preparation of documents, form filling and their submission to the MCA portal. Where the Digital certificate and Director Identification are concerned, it takes about The DSC and DIN of the proposed directors can be obtained in 1 day. The Certificate o1-2 days. Similarly, incorporation of OPC may take around anywhere between 3-5 days, with the total process being subject to approximately 10-12 days on an average depending on the departmental enquiry & verification.
Why Choose Legalmart?
Thus, OPC is an entity that comes with multiple benefits such as tax deductions, limited liability, easier funding, credit rating benefits, lower rates of interest and easier loan facilities, which naturally gives it an edge over sole proprietorship concerns. The process of incorporation could become easier and hassle-free with Legalmart, which not only guides you through whole process but also assists in document preparation, form filling and submission of forms on the portal. Hence, you receive your certificate of registration in a quick, simple but efficient way. Good Luck!