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One Person Company

It is said that “A One Person Company is a complete shift in the Indian corporate regime, bringing it at par with global standards.” An OPC is unique wherein it combines most of the benefits of a proprietorship and a company from of business. Thus, it does away with the difficulties of finding the right people to collab with, to start your own company.
As per section 3(1)(c) of the Companies Act, 2013, an OPC may be formed for any lawful purpose by one person being a citizen of India.
As per provision of section 2(62) of the Companies Act, 2013 defined (62) “one-person company” means a company which has only one person as a member.
For the formation of OPC – Only a natural person who is an Indian citizen and resident in India­­-
  • shall be eligible to incorporate a One Person Company;
  • shall be a nominee for the sole member of a One Person Company.
the term “resident in India” means a person who has stayed in India for a period of not less than 182 days during the immediately preceding one financial year.

Features

The whole idea of One Person Company is to promote the incorporation of micro-businesses and persons with corporate level ideas to provide uplift to entrepreneurs who have high potential to start their own venture by allowing them to create one-person company.
The OPC is appropriate for tiny businesses wherever the turnover isn’t possible to cross Rs. 2 Crores.
  • Members - There can be only one member at a time. However, one nominee is mandatory to be appointed. This member and nominee cannot be a minor.
  • Directors - Can have more than 1 directors, but the shareholder cannot be more than 1.The company may have a maximum of 15 directors (As per the companies act, if nothing is mentioned in the incorporation document, it would be assumed that the sole shareholder shall also be the sole director in the OPC and which shall be particularly the case in most OPC incorporated).
  • Paid Up Capital - Minimum authorized share capital required for One Person Company having share capital is Rs.1,00,000/-. But If an OPC crosses a turnover of over Rs 2 crores or has a paid-up capital more than Rs 50 lakhs. It must be converted into a private or public within 6 months.
  • Name – OPC company needs to get itself registered as a private limited company. It is a compulsory requirement under the Companies Act, 2013 for all the private companies to add the word ‘limited’ after their name. The words ‘One Person Company’ must be mentioned below the name of the company, wherever the name is affixed, used or engraved.
  • No deposits from Public: Just like Private Limited Company, OPC is also not allowed to accept deposit or loan from persons other than its member, directors or their relatives.

Why OPC?

  • Easy to Operate - OPC is 1 of the easiest forms of corporate entities to operate. Very few ROC filings are to be registered with the Registrar of Companies. No need to handle Annual General Meeting and other regular compliances.
  • Limited Liability - The directors’ personal property is forever safe in no matter the debts of the business. In OPC only investment in the company is lost, personal assets of the directors are saved. It means limited roughly to the face value of the shares they own contrary to partnerships and sole proprietorships, where the partners and business owners are jointly and severally liable for the debts of the business
  • Continuous Existence - A company has its own identity which doesn’t affects by the death, insolvency or bankruptcy of its shareholders or directors. It would pass on to the nominee director, therefore, it has continued existence.
  • Full Control over the Company with a Single Owner - This fact helps in fast decision making and execution. Yet OPC can select as many as 15 directors for official functions, without providing any share to them.
  • Greater Credibility - An OPC requires to have its books audited yearly, it has higher credibility between vendors and lending institutions.
  • Easy to raise funds and loans – With higher credibility comes, higher finance opportunities, thus enabling it to raise funds and loans easily as compared to proprietorship form of business.

Documents Required

  1. Copy of PAN Card of director
  2. Passport size photograph of director
  3. Copy of Aadhaar Card/ Voter identity card
  4. Copy of Rent agreement (If rented property)
  5. Electricity/ Water bill (Business Place)
  6. Copy of Property papers (If owned property)
  7. Landlord NOC
  8. Director Identification Number (DIN) of all the directors
  9. Digital Signature Certificate (DSC) of all the directors
  10. Memorandum of Association (MOA)
  11. Articles of Association (AOA)
  12. Consent letter of Nominee

Frequently Asked Questions

Q. A person can be member or nominee in how many OPCs?

  • A. A person can be a member of only one OPC. This is the same case with regards to the nominee of an OPC also. A nominee of an OPC cannot be a nominee of another OPC.
  • Q. Are there any threshold limits for an OPC to mandatorily get converted into either private or public company?

  • A. In case the paid-up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into a private or public company.
  • Q. What is the mandatory compliance that an OPC needs to observe?

  • A. The basic mandatory compliance is: -
    • At least one Board Meeting in each half of calendar year and time gap between the two Board Meetings should not be less than 90 days.
    • Maintenance of proper books of accounts.
    • Statutory audit of Financial Statements.
    • Filing of business income tax return every year before 30th September.
    • Filing of Financial Statements in Form AOC-4 and ROC Annual return in Form MGT 7.
  • Q. Who cannot form a One Person Company?

  • A minor shall not be eligible to become a member
  • Foreign citizen
  • Non-Resident
  • Any person incapacitated by contract
  • Q. Is share transfer allowable?

  • A. Shares will not be allowed to be transferred to anyone else.
  • Q. Does public invitations are allowed?
  • A. An OPC is prohibited from giving any invitations to public to subscribe for the securities of the company.