One Person Company (OPC)

Overview

A One Person Company (OPC) is a business structure introduced under the Companies Act, 2013 in India, allowing a single individual to own and manage a company. It is ideal for small business owners and entrepreneurs who want to limit their liability but still enjoy the benefits of a corporate entity.

Key Features of a One Person Company (OPC):

Single Shareholder:

•  An OPC can be owned by a single person who holds 100% shares in the company.

Limited Liability:

• The owner’s liability is limited to the amount of capital invested in the company. Personal assets are protected in case of financial     losses.

Separate Legal Entity:

•  An OPC is a distinct legal entity separate from its owner, which means it can enter into contracts, own property, and sue or be sued in its name.

Minimum Compliance:

•  OPCs enjoy a simpler compliance regime compared to other companies. They are not required to hold annual general meetings (AGMs) and face minimal reporting requirements.

 Nominee Requirement:

• The sole shareholder must nominate a person to become the shareholder in case of their death or incapacity. This nominee will take over the shares, ensuring business continuity.

No Minimum Capital:

•  Unlike other companies, OPCs don’t have a mandated minimum capital requirement.

Advantages of One Person Company (OPC):

• Full Control: The owner has complete control over decision-making and management, making it a flexible structure.
• Limited Liability: Unlike sole proprietorships, the personal assets of the owner are protected in case of business debts.
• Credibility and Funding: Being a company, an OPC enjoys greater credibility and easier access to funding from banks or investors.
• Simple Compliance: OPCs face fewer regulatory hurdles compared to other company types, which makes it easy to maintain.

Disadvantages of One Person Company (OPC):

• No Multiple Shareholders: An OPC can only have one shareholder, limiting the potential for raising capital from multiple investors.
• Conversion Requirement: If the annual turnover exceeds ₹2 crore or the paid-up share capital exceeds ₹50 lakh, the OPC must be converted into a private limited company.
• Limited Scope for Growth: Due to restrictions on membership, scaling may become challenging compared to other business structures.

Documents for One Person Company (OPC) Registration

1. Proof of Identity of the Sole Shareholder

• Aadhaar Card (mandatory for Indian residents).
• Passport or Voter ID (as an alternative).

2. Proof of Address of the Sole Shareholder

• Utility Bill (Electricity bill, water bill, or gas bill) in the shareholder's name (not older than 2 months).
• Bank Statement or Property Tax Receipt (not older than 2 months).
• Rental Agreement (if the shareholder resides on a rented property).

3. Proof of Identity and Address of the Nominee

• Aadhaar Card of the nominee.
• Passport or Voter ID (if Aadhaar is not available).
• Utility Bill (for proof of address, not older than 2 months).

4. Proof of Registered Office Address

• Utility Bill (Electricity, water, or gas bill) of the office address (not older than 2 months).
• Rental Agreement (if the office is rented) or Property Ownership Document (if owned).

5. Passport-Size Photographs:

•      Recent passport-sized photographs of the sole shareholder and nominee director.

6. Memorandum of Association (MOA) and Articles of Association (AOA)

• MOA: A document that defines the objectives, scope, and purpose of the OPC.
• AOA: Outlines the rules and regulations for managing the company.

7. No-Objection Certificate (NOC) from the Owner

• If the office is rented, a NOC from the landlord is required for using the address as the company’s registered office.

8. Additional Documents (if applicable):

• Incorporation Certificate for any previously registered businesses (if applicable).

Eligibility to Form an OPC:

1.     Only One Person: Must be an individual who is a resident of India.

2.     Nominee Requirement: A nominee must be designated in case the owner cannot continue.

3.     Not a Minor: The individual incorporating the OPC cannot be a minor.

4.     Capital Requirement: The minimum authorised capital for incorporating OPC is ₹1 lakh but there is no minimum paid-up capital requirement.

5.     Legal Compliance: The individual must comply with all the requirements of the Companies Act and the Ministry of Corporate Affairs (MCA).

True consultant Process to Register an OPC:

1.     Consultant with our Experts:

2.     Provide complete documentation

3.     Filing of DIN and DSC for shareholder

4.     Approval of Name

5.     MOA and AOA Drafting

6.     Filing of Forms with registrar of companies

7.     Incorporation Certificate

8.     PAN and TAN Application

9.    Post-Incorporation Support

Compliance for One Person Company (OPC)

1. Annual Compliance Requirements

2. Financial and Tax Compliance

3. Corporate Governance Compliance

4. Other Compliance Requirements

 Penalties for Non-Compliance

• Late Filing of Documents: Penalty of ₹100 per day (maximum ₹1,00,000).
• Failure to File Income Tax Return: Penalty up to ₹10,000 for delay.
• Failure to Appoint Auditor: Penalty of ₹1,000 per day for delay.

Conclusion

A One Person Company is an ideal option for individual entrepreneurs seeking to start a business with limited liability. It provides the benefits of a company structure while maintaining simplicity in compliance. However, potential growth restrictions and the need to convert to a private limited company in certain circumstances must be considered when choosing this structure.