Overview

To encourage self-employment and inspire those qualified to launch a business of their own, the Companies Act 2013 created the idea of a One Person Company in India. It supports the entrepreneurs’ capacity to have limited liability and complete control over their businesses. The Memorandum and Articles of Association must name a nominee who will assume control of the company if the founding member dies or becomes incompetent for whatever reason. You can build a proper company by adhering to the laws of a One-person company. 

What is a one person company?

A “one-person company (OPC)” is a business with just one member, according to the definition of Section 2(62) of the Companies Act, 2013. Any natural person (who should not be a minor) who is an Indian citizen and is either a resident of India or an NRI is qualified to form a Person Company and nominate a nominee of an OPC. The time limit for non-residents has been shortened to 120 days. There are lots of advantages to a One-person company compared to other companies. 

Benefits of one person company registration

One-person companies are the corporatization of sole proprietorships, so they have all the advantages of corporations in addition to various leniencies in applying company law. The multiple benefits include:

• It is a distinct legal entity.
• The director’s and Shareholder’s liability is constrained.
• An organized OPC will enable access to more benevolent financial services. Legal standing and public acclaim for your company. It boosts the trust of customers and suppliers in doing business.
• The same person can be nominated as the Shareholder and director of the company.
• A nominee may take over the company in case of death or disability.
• The availability of exemptions from several corporate law provisions.

Following are a few advantages of a one-person company.

• Limited Liability Protection for Directors’ Personal Assets – Startups frequently require credit and need to borrow money. In the case of typical partnerships, the personal savings and property of the partners would be in danger if the business could not pay back its loans. In a one-person private limited company, only the capital invested in the industry is lost; the directors’ assets are protected.
• Better reputation and credibility in the marketplace – OPC operates as a Private Limited Company, a well-liked and well-known corporate firm in India. Government agencies, corporate clients, and vendors prefer working with private limited companies over proprietorship businesses.
• Simple to generate capital and obtain loans – One of the simplest corporate entity types to control is the OPC. The Registrar of Companies must receive minimal ROC filings (ROC). Annual General Meetings (AGMs) and other required compliances are not necessary.
• Aids in Testing of Business Models and Facilitates Funding – The OPC business enables Startup Entrepreneurs to test their business models quickly. Once they have developed a marketable product, they can approach Angel Investors and Venture Capitalists for funding and promptly transform their OPC into a Multi Shareholder Private Limited Company.
• One Owner Has Complete Control of the Business, Enabling Quick Decision-Making and Action. However, OPC can select up to 15 directors for administrative duties without giving them a portion of the authority.
• Simple to Sell OPC – A Person Company (OPC) requires very little paperwork and no financial outlay to be sold.

Minimum requirements for OPC registration

Under the provisions of the Firms Act of 2013 and its implementing regulations, a one-person company can be quickly registered. Quick registration eliminates the need for partners and allows one-person companies to operate as businesses. It will inspire more people to start businesses as a result of this. A one-person company will be beneficial for a lot of simple businesses. Small enterprises with turnovers that are unlikely to exceed Rs. 2 Crores should use the OPC. The nominee or director must be an Indian resident, which is a need for OPC registration.

• One Shareholder
• One Nominee
• Minimum Directors: 1
• Minimum of One lakh Authorized Share Capital 
• One person can be nominated as both director and a shareholder
• Only an Indian resident can be the Shareholder & nominee of the company
• All Directors require DIN (Director Identification Number)
• One promoter and one witness with DSC (Digital Signature Certificate)
• The director must be Indian Resident (Minimum requirement: 1)

Documents required for OPC registration

Documents for the application director, the company, the nominee, and the central location of business are the four categories into which the OPC registration documents can be divided. There are certain documents required for OPC. The OPC registration documents needed in India are described below.

• The present directors’ DINs.
• The nominee’s personal documents and KYC information; (PAN card, Proof of Identity, Proof of registered address)
• The application director’s PAN card, proof of identity, and proof of registered address 
• The company’s AoA
• First directors’ affirmation of the veracity of the information and materials submitted with the application (INC 9)
• The MOA of the firm, with all six clauses—the name clause, the situation clause, the object clause, the liability clause, the capital clause, and the nominee provision—is completely filled out with information.
• Form of nominee consent (INC 3)
• A No objection statement from the property owner 
• Statement of independent CA, CS, or High Court Advocate (INC 14)
• Rental Agreement or property records for the location
• Documentation confirming the registered address of the primary place of business

One person company registration procedure

To register your One Person Company, follow the instructions provided:

Step 1:

Apply for DSC by providing documentation such as address proof, an Aadhaar card, a PAN card, a photo, an email address, and a phone number.

Step 2:

Name Reservation: On the MCA portal, under “MCA SERVICES,” you can apply for the company’s name using the “SPICe+” tool. ‘New Application’ by clicking on it, then submitting SPICe+ form Part A. In this situation, It can offer two names for name reservations. The company name must include the suffix “(OPC) Private Limited.”

Step 3:

The director’s and subscriber’s DINs should be applied during the form submission. Then, fill out SPICe+ Part B entirely with all the necessary information. Along with Form INC-3, you must upload all supporting documentation.

Step 4: 

Following the submission of SPICe+ Part B, other forms such as AGILE-PRO, SPICe+ AoA, and SPICe+ MoA must also be filled out and provided with information. Using the data entered in SPICe+ Part B, INC-9 will be automatically created.

Step 5: 

Upload the necessary paperwork to the MCA portal by attaching it to the SPICe+ Form, SPICe+MOA, and SPICe+AOA together with the Director’s DSC.

Step 6: 

The ROC will finally issue the Certificate of Incorporation following verification.

What are taxation rules applicable for OPC?

The following is a list of the tax regulations that apply to a one-person business:

• The corporation must submit income tax returns.
• The TDS (Tax Deducted at Source) form must be completed each quarter and include the TAN.
• If an OPC employs more than ten people, it is required to register for Employee State Insurance (ESI).
• An OPC’s income is taxed at 30% of its total income for the financial year under the tax rates slab.

What are the exemptions available for OPC?

The exemptions available after acquiring OPC Registration are given below:

• Initial Annual Returns.
• Hold board meetings and annual general meetings (AGMs) (BM).
• Approving the company’s financial statements
• The choice to distribute without having to hold an AGM
• The Tribunal’s authority to convene meetings of its members.
• A statement will be attached to the notice.
• Call for EGM (Extraordinary General Meeting).
• Meeting notification.
• Meeting quorum.
• Proxies
• The moderator of meetings.
• The use of electronic voting.
• Limitations on the right to vote.
• A show of hands for voting.
• Distribution of the members’ resolution
• The need for a poll.
• A postal ballot

What are the annual compliances for one person company?

Person companies must follow several laws established by organizations like the Ministry of Corporate Affairs (MCA), the Income Tax Department, the GST Departments, etc. Regardless of its size or yearly revenue, every OPC with Indian incorporation must complete the annual submissions.

The standards for annual compliance that a one-person business must satisfy are as follows:

• The initial board meeting and 
• Subsequent board meetings
• Annual General Meeting, 
• Directors must disclose their financial interests (MBP-1)
• Filing of the financial statements (Form AOC-4)
• Appointment of the auditor
• Submitting Form DIR-3 KYC
• Annual Return Filing (Form MGT-7)
• Submitting Form INC-22A
• Submitting Form DPT-3 (Return of Deposits)
• Submitting a business-starting certificate (Form 20A)
• Submitting MSME Form I

It might be challenging for an OPC to manage diverse business operations following the complex corporate and tax rules. Because of this, it is advised to carry out various tasks under the direction of a professional to comprehend legal requirements and timely complete compliances to avoid penalties and fines.