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One Person Company (OPC)
The One Person Company (OPC) was recently introduced as a strong improvement over the sole proprietorship. It gives a single promoter full control over the company while limiting his/her liability to contributions to the business. This person will be the only director and shareholder (there is a nominee director, but with no power until the original director is incapable of entering into contract). So there's no chance of raising equity funding or offering employee stock options. Furthermore, if an OPC hits an average three-year turnover of over Rs. 2 crore or has a paid-up capital of over Rs. 50 lakh, it must be turned into a private limited company or public limited company within six months.
Though a One Person Entity allows a lone Entrepreneur to run a business with Limited Liability protection, a OPC does have a few limitations. For instance, every OPC must nominate a nominee Director in the MOA or AOA who will become the owner of the OPC in case the promoter Director is disabled. Also, a OPC must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year. Therefore, it is important for the Entrepreneur to carefully consider the features of a OPC prior to incorporation. IndiaFilings can help incorporate a One Person Company (OPC) in India.
Advantages of One Person Company(OPC)
1. Limited Liability.
2. Legal Status and Corporate Identity.
3. Helps to build a Brand for your Company.
4. Easy access to loans and funds from Banks and Financial Institutions.
5. Quick Decision Making and Flexible in Management.
6. Tax Saving.
Knowledge on One Person Company(OPC)
1. One Person Company(OPC) as the name suggest, can be registered with single person as the member, but it has an advantage of having 15 Directors in its company.
2. One Person Company is defined in Sub- Section 62 of Section 2 of The Companies Act, 2013, which reads as follows: One Person Company means a company which has only one member.
3. But, there is an additional requirement which has to be fulfilled for forming an one person company i.e. a nominee has to appointed during the incorporation of One Person Company. This nominee, will can undertake the management of the company, in case of death of Sole member.
4. Registering a One Person Company enables small business people to run a company with corporate identity and it will give them an opportunity to expand their business globally.
5. One Person Company will give the businessman all benefits of a private limited company which means they will have only limited liability, legal protection for business, access to credits, bank loans, access to market etc, all in the name of a separate legal entity.
Features of One Person Company (OPC)
1. Only One Shareholder:
Only a natural person, who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company. Explanation: 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 calendar year.
2. Nominee for the Shareholder:
The Shareholder shall nominate another person who shall become the shareholders in case of death/incapacity of the original shareholder. Such nominee shall give his/her consent and such consent for being appointed as the Nominee for the sole Shareholder. Only a natural person, who is an Indian citizen and resident in India shall be a nominee for the sole member of a One Person Company.
Must have a minimum of One Director, the Sole Shareholder can himself be the Sole Director. The Company may have a maximum number of 15 directors.
Documents Required for OPC Registration
TO BE SUBMITTED BY DIRECTOR
1. Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
2. Scanned copy of Voter's ID/Passport/Driver's License
3. Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
4. Scanned passport-sized photograph
5. Specimen signature (blank document with signature)
FOR THE REGISTERED OFFICE
1. Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
2. Scanned copy of Notarised Rental Agreement in English
3. Scanned copy of No-objection Certificate from property owner
4. Scanned copy of Sale Deed/Property Deed in English (in case of owned property)
Terms and Restrictions of OPC
1. A person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company.
2. Minor cannot shall become member or nominee of the One Person Company or can hold share with beneficial interest.
3. An OPC cannot be incorporated or converted into a company under Section 8 of the Act. [Company not for Profit].
4. An OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate.
5. An OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital) is increased beyond Rs.50 Lakhs or its average annual turnover during the relevant period exceeds Rs.2 Crores i.e., if the Paid-up capital of the Company crosses Rs.50 Lakhs or the average annual turnover during the relevant period exceeds Rs.2 Crores, then the OPC has to invariably file forms with the ROC for conversion in to a Private or Public Company, with in a period of Six Months on breaching the above threshold limits.