India has witnessed a significant surge in entrepreneurial ventures over the past decade. With the rise in startups and independent business owners, the government has introduced various business structures that cater to different needs. One such structure that gained popularity is the One Person Company Registration model, a unique blend of the advantages of sole proprietorship and a private limited company.
Launched by the Companies Act, 2013, the One Person Company (OPC) is a legal entity where an individual can run a business with limited liability. It is a boon for solo entrepreneurs who desire to avail themselves of the benefits of a corporate structure without involving partners or co-founders.
What is a One Person Company (OPC)?
A one-person company is a form of private limited company that may be incorporated by a single person. In contrast to common private companies, which have at least two shareholders and directors, an OPC may be incorporated with a single director and a single shareholder. The sole member is, however, required to nominate a nominee at incorporation, who shall act in place of the company in the event of death or incapacitation.
The idea was brought in to provide a legal identity to solo entrepreneurs so that they can differentiate between personal property and business debts, thereby encouraging more individuals to join the formal economy.
Advantages of a One Person Company
Limited Liability Protection
Limited liability is one of the major benefits of OPC. The personal assets of the owner are not liable in case of business loss or liabilities.
Separate Legal Entity
An OPC is treated as a distinct legal entity from the owner. It can own assets, enter into contracts, and sue or be sued in its name.
Ease of Management
Since there is only one individual, decision-making is quick. No need to consult or seek permission from other directors or shareholders.
Better Credibility and Trust
Being listed under the Ministry of Corporate Affairs (MCA) and governed by the Companies Act strengthens the business's credibility. It helps in developing faith among customers as well as investors.
Survival Continuously
The business continues to have an existence perpetually, as even after the owner's death or incapacitation, it continues to exist perpetually, due to the nominee system.
Who May Register an OPC?
For registration of an OPC, the following prerequisites need to be fulfilled:
The member should be an Indian resident, i.e., he or she should have remained in India for at least 120 days of the last preceding financial year.
The individual should be an Indian citizen.
A single OPC can be registered by a person at one time.
The nominee, too, should be an Indian resident and citizen.
An OPC cannot be created to conduct non-banking financial investment activities or for charitable purposes.
Documents Needed for OPC Registration
Ensure that the following documents are prepared before initiating the process of registration:
For the Director and Nominee:
- PAN Card
- Aadhaar Card
- Passport-size photograph
- Address proof (Voter ID, Passport, or Driving License)
- Email ID and mobile number
For the Registered Office:
Rental agreement (in case of rented premises)
NOC from the owner of the property
Utility bill (Electricity or water bill, not more than two months old)
Step-by-Step Process of One Person Company Registration
Here is a step-by-step guide to the procedure of registering an OPC in India:
- Get a Digital Signature Certificate
Get a Digital Signature Certificate of the proposed director, which is required for signing electronic documents at the time of registration.
- Apply for Director Identification Number (DIN)
DIN is a separate number that is assigned to someone who wishes to be a director of a company. It may be used together with the SPICe+ form.
- Select and Reserve Company Name
The company name must be distinctive and different from any previous company or trademark. The company name should have the suffix "OPC Private Limited."
- Prepare the MoA and AoA
The Memorandum of Association (MoA) states the objectives of the company, whereas the Articles of Association (AoA) specify the management rules.
- Filing of SPICe+ Form
This is the primary form to incorporate a company. It contains different sections like:
- Company name reservation
- DIN allotment
- Incorporation application
- PAN and TAN application
- Appoint a Nominee
The sole member must nominate someone who will assume the role of the member in case of death or incapacity. This nominee's consent must be submitted in Form INC-3.
- Pay Registration Fees and Stamp Duty
The applicable fees depend on the authorized capital and state of incorporation.
- Certificate of Incorporation
After the Registrar of Companies (RoC) has checked the documents and is satisfied, the Certificate of Incorporation (COI) will be issued, which is the legal birth of the OPC.
Post-Registration Compliance
- Despite being simpler to run, OPCs are still subject to some legal compliance:
- Keep proper books of accounts
- File annual returns and accounts with the RoC
- Carry out statutory audits
- Appoint an auditor within 30 days of incorporation
- Non-compliance may attract penalties and legal issues.
When To Choose OPC?
If you are a solo entrepreneur and you wish to start a business with little risk and complete control, an OPC would be an excellent option. It is best suited for:
- Freelancers and consultants
- Small companies
- Early-stage businesses
- Traders and craftsmen
But if you want to grow rapidly, introduce partners, or raise venture capital, a private limited company may be a more suitable option.
Conclusion
One Person Company Registration is an extraordinary move by the Indian government to give sole entrepreneurs a legitimate and legally recognized business form. It provides a series of advantages such as limited liability, simplicity in management, and legal recognition, all while making you the exclusive controller of your business.
By adopting the right procedure and being compliant, you can experience the benefits of corporate identity without all the hassle associated with conventional company frameworks. If you're all set to go for your concept in the shape of a legal undertaking, then availing the service of One Person Company Registration could be your way forward.
