A business entity run by a sole owner with the benefit of limited liability, offering protection to its shareholders is a One Person Company. Only one Director is required to form a One Person Company.
With supporting documents such as DIN, DSC, etc., an OPC can be registered within two weeks.
Features of One Person Company
As the name suggests, a minimum of one Director and one member is required to form a One Person Company. Hence, the sole shareholder can be the Director itself. A maximum number of 15 Directors are possible for a One Person Company.
- One Shareholder
A person of Indian origin and an Indian citizen can form a One Person Company.
- Nominee for the Shareholder
A shareholder may appoint another person as a shareholder in case of death or incapacity of the original shareholder. The nominee shall give its consent to be appointed as the sole shareholder.
As the government has not strictly specified, the tax rates for any Private Limited Company are applicable to a One Person Company.
One Person Company has the leverage of not complying with many requirements that are applicable to a Private Limited Company.
Terms and Restrictions of One Person Company
- A person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company.
- Only a person who is not a minor is eligible to be a nominee of the One Person Company
- One Person Company cannot be incorporated or converted into a limited company
- A One Person Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate.
- Such a company cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company unless the capital is increased beyond Rs.50 Lakhs or its average annual turnover during the relevant period exceeds Rs.2 Crores
Advantages of One Person Company
- One Person is a separate legal entity from its members
- Liability of member is limited
- One Person Company is a Private Limited Company is best suited for new entrepreneurs
- As in the case of any other Company, the mandatory requirement of an auditor is not applicable
- The necessity to hold a number of Board Meetings and General Meetings does not apply to One Person Company
The process to Incorporate One Person Company
- Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the proposed Director(s) in case it is not already available
- Check for Company name availability by filing form INC-1
- Obtain the consent of nominee for the sole shareholder
- Draft Memorandum of Association and Articles of Association
- Once the name of the Company is approved, sign and file various documents electronically including MOA and AOA along with form INC-2, which is required for the incorporation of the Company, with the Registrar of Companies
- Form INC-2 must be filed within 60 days of filing form INC-1
- Payment of Requisite fee to Ministry of Corporate Affairs and also Stamp Duty
- The Registrar of Companies scrutinizes and validates the documents
- Receipt of Certificate of Registration/Incorporation from the Registrar