OverView One Person Company
As per the Companies Act, 2013 an One Person Company (OPC) is an unique entity where an individual can form a company. It combines the concept of a company with limited liability and succession, allowing a person to own and operate a company in their name.
Prior to the implementation of the Companies Act of 2013 only two people could form a company. The Companies Act of 2013 supports the formation of One Person Company (OPC) in India. It governs the registration and functioning of one person company in India. In comparison with a public company a private company should have at least two directors and two members however on the contrary, one person company registration doesn’t need any group of people to be incorporated.
As per the Section 262 of Companies Act of 2013 and official registration of OPC in India is legal. One person company registration in India requires a single director and a single member representing the whole firm. This corporation type has very few compliance requirements in comparison with a private corporation.
Documents Required for OPC Registration
Identity and Address Proof
Scanned copy of PAN card or passport (foreign nationals & NRIs)
Scanned copy of voter ID/passport/driving
Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill
Scanned passport-sized photograph specimen signature (blank document with signature [directors only)
Registered Office Proof
Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill
Scanned copy of notarised rental agreement in English
Scanned copy of no-objection certificate from the property owner
Scanned copy of sale deed/property deed in English (in case of owned property)Advantages Of OPC Company in India
Legal Standing
The member grants the OPC registration a separate legal entity status. The sole person who incorporated the OPC is protected by its distinct legal status. The member is not personally liable for the company’s loss; instead, his or her liability is limited to the value of the shares that he or she owns. Therefore, the OPC and not the member or director may be sued by the creditors.
Easy Access to Funding
One person company registration in India can easily raise money through venture capital, angel investors, incubators, and other sources because it is a private company. Getting money is now simple.
Less Conformity
One person company registration is given some exemptions from compliance requirements under the Companies Act of 2013. The OPC is not required to prepare the cash flow statement. The secretary of the company is not required to provide any annual reports and maintain any account books.
Easy Integration
And one person company in India can be easily integrated without any legal hassles. A member also serving as a director should provide the approval for integration. There is no minimum paid up capital requirement.
Easy to Manage
Administration of the OPC can be made simple by allowing a single person to both find and lead it. Making decisions is straightforward, and it happens quickly. The member can easily pass both ordinary and special resolutions by writing them down in the minutes book and getting just one other member to sign them. Because there won’t be any internal disputes or delays, managing the company will be easy.
Constant Repetition
The OPC has the function of perpetual succession even with only one member. A nominee must be chosen by the single-member when incorporating the OPC. The candidate will take over operation of the company in the event that a member passes away.
Checklist for One Person Company Registration
- Maximum and minimum membership requirements must be met
- There should be a nominee chosen before incorporation
- Use Form INC-3 to request the nominee’s approval
- The Companies (Incorporation Rules) 2014 mandate that the OPC name be selected
- Minimum authorised capital of ₹1 Lakh
- DSC of the potential director
- Evidence of the OPC’s registered office.
Compliances for a One Person Company
Certain compliances are outlined in the Companies Act of 2013 and must be met by the specified deadlines. These regulations provide openness, good governance, and safeguard the interests of all parties involved, including the ROC, shareholders, directors, investors, and tax authorities. These compliances can be divided into annual compliances, recurring compliances, post-incorporation one-time compliances, and compliances dependent on events. The first category of one-time compliances has been thoroughly covered here.
One Time Compliance
A one person company must immediately comply with specific legal requirements outlined by the Companies Act of 2013 and, if necessary, secure local registrations in accordance with the state laws of the location where the OPC is conducting business. The complete list of compliances along with their deadlines is shown below. For in-depth discussions, contact one of our startup advisors.
| Compliance Requirement | Due Date |
|---|---|
| Appointment of First Auditor | Within 30 Days of Incorporation |
| Issue of Share Certificate | Within 60 Days of Incorporation |
| Stamp Duty Payment on Share Certificate | Within 30 Days of Certificate Issue |
| Filing of INC-20A (Declaration for Business Commencement) – Registered Address maintenance – Registered office details filing – Current Bank Account opening – Entire Subscribed Capital received | Within 180 Days of Incorporation, but before commencing business |
Note: The due date for Compliance Requirement 4 is a bit more complex, so we have broken it down into its component parts to provide clarity.
Steps for Registration of OPC
- Step 1: Check the eligibility and documentation
- Step 2: Request DSCs and DINs for each director
- Step 3: Submit a request for a name reservation Form Spice+ for company incorporation
- Step 4: Apply for PAN and TAN for your new business
- Step 5: RoC issues an incorporation certificate with a PAN and TAN
- Step 6: Open a bank account and start your business.
Features of One Person Company
Easy Succession
Despite having a single person running all the daily activities of the company, OPC provides options for perpetual succession. After the demise of a member of the company, the nominee can run the company.
Limited Liability
The member in a one-person company has limited liability. Since OPC is a registered company it is treated as a separate legal entity providing greater protection to its members. The liability of the member is limited to their shares so they are not liable for any losses conducted in the company. In case of bankruptcy, the creditors can sue the company and not the director of the company for procuring the company’s debt.
Sole Directorship and Shareholder
In one person company registration a single member acts as a director so they stand liable for managing the company’s day-to-day activities. In this case, there is no need for an executive director to run the daily needs. A single member is more than sufficient and acts as a shareholder with all responsibilities.
Ownership in Property
Since the OPC is treated as a separate legal entity the person has the right to hold property related to business and other assets in their name. The properties including machinery factories, residential property, buildings, and other assets cannot be claimed by another person. As per law, the one person company registration can acquire property directly under its name.
Tax Implications for OPC
One Person Companies (OPCs) enjoy the same corporate tax status as Private Limited Companies (PLCs) in India. This means they are subject to a flat 30% tax rate on their net profits, along with Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) as applicable. However, there are some specific tax considerations for OPCs:
No Dividend Distribution Tax (DDT)
If the sole shareholder of an OPC chooses not to draw any dividends, no DDT is applicable. This can be a tax advantage compared to PLCs, where DDT is levied on distributed profits even if the shareholder is the same.
Perquisite Taxation
The value of perquisites provided to the sole director of an OPC, such as car allowances or mobile phone bills, is taxable as part of their salary income. This is similar to the treatment of perquisites for employees in any company.
Fringe Benefit Tax (FBT)
If the OPC provides any fringe benefits to its employees, such as free meals or club memberships, these are subject to FBT at a flat rate of 30%.
Goods and Services Tax (GST)
OPCs registered under GST must comply with the same filing and compliance requirements as any other registered business. The GST rate applicable to the OPC’s goods or services will depend on the specific category.
Income Tax Return (ITR)
OPCs must file their ITR using Form ITR-6, similar to other companies. The deadline for filing ITR is September 30th of each financial year.
Tax Audits
OPCs with a turnover exceeding Rs. 2 crore in a financial year are required to get their accounts audited by a Chartered Accountant.