PLC
One Person Company Registration
The western influence is at its peak in India these days and there are a lot of ideas for start-ups that are floating around. Whether it is a youngster who is straight out of college or a retired professional, you just need a unique idea to start a business. One Person Company is one such way, that millennials are using to establish their businesses and with which they have redefined the term profession completely. OPC in India was introduced through the Companies Act, 2013 to encourage and support entrepreneurs who want to start a new venture by forming a single person legal entity wherein they can reap the benefits with limited liability. One Person Company, as the name states, can be started with just one person. An OPC has only 1 Director who can also be the shareholder of the company. However, a nominee needs to be appointed to take the place of the Director, in case he/she is incapable of performing his duties or in case of the death of said Director.
Establishing a One Person Company gives the freedom to individuals who have creative ideas and want to share their ideas with the masses through their business. However, it does not just benefit the masses but also the Director of the company. Let’s discuss some of the advantages of an OPC:
- Just like a Private Limited Company, a One Person Company is also a separate legal entity that is capable of its own existence separate from its Director. The law treats a company different from the individual who owns it.
- Setting up a One Person Company is a simpler process than setting other type of Companies, since it has minimum requirements. Only 1 Director needs to be appointed who can also be the Shareholder in the company. In the case of the demise of the Director or if he is unable to perform his duties, a Nominee is also required to be appointed. While mentioning the name of the company anywhere, it is mandatory to suffix OPC after the name to distinguish it from the other companies.
- It is easy for a One Person Company to raise funds in order to support the business. There can be many different ways like financial institutions, angel investors, venture capitals, etc. through which an OPC can receive its funding.
- A One Person Company can be termed as a small-scale industry and like all small-scale industries, it comes with some benefits. If you own an OPC, you will get a lower rate of interest on loans. In addition, it is easy to receive funding from the bank without depositing security up to a limited amount.
- The Director of an OPC experiences very limited liability in terms of the value of the shares held by him. As a Director of a One Person Company, you are free to take risks in your business without worrying about any personal losses. This leads to more opportunities for the individual who owns the company as well as the business itself.
- Since the introduction of One Person Companies, under the Companies Act, 2013, the Income Tax Department also provides some benefits to such companies. The salary paid to the Director of an OPC is allowed as a deduction, which is not the case of a proprietorship. Furthermore, Presumptive Taxation Scheme is also an option for small-scale industries like the One Person Companies.
Know how you can register a One Person Company Get Details
What are the documents required to set up your OPC, you ask? Don’t worry, let’s discuss the process of registration and the documents that you need to establish your dream business. Our experts at All India ITR will guide you through the procedure during the consultation after you buy our plan to register your One Person Company.
| Identity Proof of Director and Nominee Director |
Only Indian Nationals are allowed to serve as Director and/or Nominee Director of a One Person Company in India.
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| Address Proof of Director and Nominee Director |
One of the following documents can be submitted as ID proof by the Director and Nominee Director:
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| Proof of Registered Office in India |
Along with the residence proof of the Director and Nominee Director, it is also mandatory to submit the address proof of the registered office in India.
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| Signed Incorporation Documents | A signed hard copy of the documents filed for the application of the Digital Signature along with other incorporation documents such as MoA (Memorandum of Association) and AoA (Articles of Association), Affidavit of Subscriber and Director, etc. also need to be filed to register an OPC. |
Now that we have spoken about the documents required to register your One Person Company, let’s go through the process, how we will help to acquire certain documents and then file them to get you started with your business.
Let’s start with the services we cover when you purchase our Register One Person Company Plan –
- Application for Digital Signature Certificate (DSC) and Director’s Identification Number (DIN)
- Reservation of the company’s proposed name with RUN. We will also keep a tab on the approval of the name as well.
- Application of Permanent Account Number (PAN) and Tax Deducted and Collected Account Number (TAN) for you and your company.
- Filing of the SPICe Form which is a multi-functional form used to file for the incorporation of a company, apply for DIN and reservation of company name with RUN.
- Format for Memorandum of Association (MoA) and Articles of Association (AoA) will be provided by us. You can provide the clauses to be added to them.
- Certificate of Incorporation will be issued.
Know how you can make changes in MoA and AoA Get Details
Keep in mind – The Government fees and stamp duty will be covered under this plan for authorized capital of up to Rs. 1 lakh. Registration of One Person Company is only allowed for Indian Nationals. Foreign National or Foreign Body Corporate that needs approval from the RBI, SEBI or IRDA will not be allowed to establish a One Person Company.
The first step for you, as a Director, to register any type of company is getting the Digital Signature Certificate (DSC) and Director's Identification Number (DIN). DSC is a secure digital key that is used by the Director of a company to electronically sign certain documents. Whereas, DIN is the identification number given to every Director of all companies.
After receiving the DIN and DSC, let's select the name of your company now. There is no restriction while picking a name for your company, however, make sure the name you select conveys what the business does and the name that you choose is unique. We will reserve your proposed name on RUN (Reserve Unique Name), Ministry of Corporate Affairs' web portal that helps reserve proposed company name.
Now you can sit back and relax! You provided us with all the documents we needed to file for the registration of your company, we will take it from here. Our experts at All India ITR will file all the necessary documents with the Registrar of Companies (ROC), who, after the verification of all documents will process the application.
We are almost done! The ROC has processed your application to register a One Person Company. As soon as we receive your Certificate of Incorporation (COI), we'll send it to you. The COI finalizes the process of registration and is proof that the company has been registered.
Congratulations your company is registered! But everything great comes with a few concerns as well. Despite the fact that establishing your own OPC let’s you have the free reign to make every decision related to your business, there are certain limitations to establishing a One Person Company as well. Let’s talk about some of them:
- Establishing an OPC requires a certain investment to be made as shares. This investment needs to be a minimum of Rs. 1 lakh.
- Once you put in the money, your One Person Company becomes an OPC that is limited by shares and such a company must comply with certain norms such as the shares cannot be transferred to a third party. Moreover, the Shareholder is prohibited from trading any shares to the public.
- An OPC cannot be converted into any other kind of company voluntarily till it completes 2 years of existence. However, an exception can be made where the paid-up share capital of a company is Rs. 50 lakhs or more or the average annual turnover, during the relevant period, exceeds Rs. 2 crores.
- A One Person Company cannot be converted into another company registered as the same suffix, OPC.
- The tax rate for all OPCs is the same as that of a Private Limited Company, i.e. 25%.
- An OPC limited by shares needs to maintain a record of all contracts or offers in a written log or memorandum or in the minutes of Board Meeting that is held after receiving the contract or offer. This needs to be done within 15 days from the date of approval.
Know all about the annual compliances of an OPC Get Details
Now that your company is established, it’s time to talk about some compliances that need to be complied with to run it smoothly. Let’s start with what needs to be done right after the registration process is complete
- Every company needs to get two rubber stamps after incorporating the company. One of them has to be a round shaped stamp which has the company’s name engraved on it. The other stamp is supposed to have the company’s name along with the designation of the authorized signatory. These stamps are mainly used to validate all the documents of the company.
- The next important step, after getting the stamps of the company made, is to get the letterhead, invoices and notices drafted and printed with the name of the company and the address of the registered office.
- It is mandatory for every company to open a bank account with any Government or private bank, in order to carry out any transactions in the name of the company.
- Now that a bank account is opened for an OPC, the Director of the company needs to hire an auditor within 30 days from the incorporation date. An auditor is a practicing Chartered Accountant who will audit the financial accounts of the company.
- The most important task to be performed after the incorporation of a One Person Company is the allotment of shares. Since it is an OPC, a duly signed certificate with the company seal needs to be issued by the Director to the Shareholder certifying the ownership of shares.
A part from these compliances that need to be taken care of immediately after the registration of the company is complete, there are some annual compliances as well that need to be catered to on a yearly basis.
- The first board meeting needs to be held within 30 days of the incorporation of the company. Under Section 173 of the Companies Act, 2013, all One Person Companies are required to hold at least one Board Meeting after every 6 months. The minimum gap between two meetings has to be 90 days.
- Like every company, an OPC also needs to prepare an annual report that contains the specifics of the current financial year. The annual report contains balance sheet prepared at the end of the financial year, detailed account of profit and loss, a statement of all changes in equity and an explanatory note attached to all documents mentioned. However, cash flow statement is not considered a part of the annual report. All annual reports must always be signed by the Director of the company.
- Taxation is mandatory for all individuals and companies alike in India. A One Person Company falls in the same tax bracket, as set by the Income Tax Act, 1961, as applicable on a Private Limited Company, i.e. 30% in addition to the education tax plus the surcharge applicable. MAT (Minimum Alternative Tax) is also levied on an OPC.
- a company employs more than 10 employees, it is mandatory for such a company to get registered under the ESI (Employee’s State Insurance) Act, 1948.
- It is also compulsory for a One Person Company to file GST Returns as per the due dates if the company is registered under the Goods and Services Tax Act.
Yes, there are a lot of compliances that a One Person Company needs to comply with but there are some exemptions that an OPC gets as well. Under the Companies Act, 2013, Section 98 and Sections 100 – Section 111 are the exemptions that an OPC can enjoy:
- OPC has 1 member only, so the power of tribunal to call any meetings of members is not allowed.
- Since there is only 1 member, that is the Director, any extraordinary meetings cannot be called by one else.
- There is no need to send a Notice of Meetings.
- Because there is no need to send a Notice for a Meeting, no statement is required to be annexed to said Notice.
- There are no minimum criteria for said Meeting.
- The Meetings don’t need a Chairman since the Director is the only decision-maker.
- There is no provision of a proxy. The Director is required to sit for every meeting himself. No other person can take his place.
- The Director being the sole member has the veto power to vote, hence, there are no restrictions on voting rights.
- There can’t be any voting by show of hands.
- Voting through any electronic means is not required.
- There is no need for a demand for poll.
- Any resolution passed doesn’t need to be circulated since the veto power lies in the hands of the Director only.
- Postal ballot is voting by posts or drawing chits. This doesn’t apply to One Person Companies.
Frequently Asked Questions
Q. What kind of business can an OPC engage in?
Besides Non-Banking Financial Investment Activities which includes investment in securities of body corporates, a One Person Company can engage in any other kind of business.
Q. How do I appoint a Nominee for an OPC?
Yes. A Nominee is a person who is appointed to replace the Director of a One Person Company, in case the Director is unable to perform his duties due to death or incapability. In order to appoint a nominee, the name of the person should be mentioned in the Memorandum of Association (MoA). The Director of the company needs to take the Nominee’s consent in Form INC-3 and needs to submitted to the ROC along with Form INC-2.
Q. What happens in case of the demise of the Director of a One Person Company?
The Director is the sole member in an OPC. If the Director of the company is unable to perform his duties due to disability or death, the Nominee takes his place. Within 15 days of appointing the Nominee as the new Director of the company, the new Director is required to appoint another Nominee who will replace him in the above mention situation. The ROC needs to be informed about the change of membership in Form INC-4 within 30 days of the change of membership
Q. When does a One Person Company cease to exist?
In a general scenario where an OPC is complying with the annual compliances, it cannot cease to exist until it is voluntarily dissolved. However, if the paid-up capital of the company exceeds Rs. 50 lakhs or the annual turnover is more than Rs. 2 crores, for a relevant period of time, then the OPC will cease to exist under the One Person Company suffix. It will, then, need to be converted into a Private Limited Company under the suffix Pvt. Ltd.
Q. Who can register a One Person Company?
As the name suggests, One Person Company only requires one person to set up the business. All entrepreneurs who want to form a company with very limited liability to their personal assets can establish a One Person Company. Also, any Proprietorship firm that wants to get the status of a company can get registered as an OPC.
Q. What is the procedure to inform the ROC when an OPC exceeds its threshold limits and is required to be converted into a Private Limited Company?
Form INC-5 is filed to intimidate the Registrar of Companies (ROC) in case a One Person Company exceeds its threshold limit, i.e. Rs. 50 lakhs for paid-up share capital or Rs. 2 crores for average annual turnover. Form INC-5 needs to be filed within 60 days of exceeding limits.
Q. Which form is filed to convert a One Person Company into a Private Limited Company?
Form INC-6 is filed to convert an OPC into a Pvt. Ltd. Company if the One Person Company exceeds its threshold limits. This form is filed with the Registrar of Companies (ROC) within 30 days in case of voluntary conversion and 6 months in case of mandatory conversion.
Q. Is it necessary for the Nominee of an OPC to have a DIN?
DIN stands for Director’s Identification Number and as the name suggests, it is meant for only the Director of a company. The Nominee, however, is required to have a valid PAN (Permanent Account Number) Card.
Q. Who is not permitted to establish a One Person Company?
To establish an OPC, an individual has to be an Indian National, but there are certain individuals who cannot form a One Person Company in India –
- A minor, an individual under the age of 18 years, cannot serve as the Director of an OPC.
- Foreign Nationals cannot form an OPC in India since FDI is not applicable in case of such companies.
- Any Non-Resident is not allowed to form a One Person Company in India.
- Any individual who is incapacitated to contract will not be able to run a business as a One Person Company.
Q. Under what conditions does a Private Limited Company convert to a One Person Company?
It is possible for a Pvt. Ltd. Company to convert to an OPC under certain circumstances –
- If a PLC has a paid-up share capital that is less than Rs. 50 lakhs, it can be converted to an OPC.
- If the average annual turnover of a Pvt. Ltd. Company is less than Rs. 2 crores, it can file for a conversion to a One Person Company.
Q. How does a Private Limited Company convert to a One Person Company?
- No Objection Certificate needs to be taken in writing from the Directors and Shareholders of the Private Limited Company before filing for a conversion.
- After the No Objection Certificate is procured, a special resolution is passed in the General Meeting with the consent of the Directors and Shareholders.
- A copy of this special resolution is then filed with the ROC within 30 days from the date the resolution was passed. This can be done in Form MGT-14.
- The PLC is required to file Form INC-6 in order to get converted into an OPC.
