You can now form a One Person Company

We are extremely glad to inform you that you can now form a One Person Company (OPC) in India, that too with the minimum hassle and cost.
Among all the other provisions of the new Companies Act, entrepreneurs seemed sitting on the edge of their seats for this one. Let us tell you why.

one man

What is an OPC?

Simply put a rather generous parting gift to the Companies Act, 1956, on the occasion of its retirement. An OPC is a hybrid structure, wherein it combines most of the benefits of a sole proprietorship and a company form of business. It has only one person as a member who will act in the capacity of a director as well as a shareholder. Thus, it does away with the hassles of finding the right kind of co-partner/s for starting a business as registered entity. The best part is, legal and financial liability is limited to the Company and not the member. Hence, you do not need to share your piece of cake in the name of partnership. You have an idea…You own it! Start your own OPC.

Legal Status of OPC

Section 2(62) defines OPC as a Company which has only one person as a member.

Incorporate your OPC

The process of incorporating the OPC is almost similar to that of a private limited company with minor differences.

  • OPC will be formed as a ‘Private Limited Company’. Hence, minimum paid up capital will be Rs. 1, 00,000.
  • It will have only one person as member.
  • Memorandum of Association of such a company will mandatorily prescribe the name of the person, who in the event of death or disability of the subscriber shall assume his position.
  • The member of the OPC will have the right to change the nominee at any time with due intimation to the Registrar.
  • OPC can be formed as company limited by share capital or limited by guarantee or unlimited company.
  • The words ‘One Person Company’ will have to be mentioned in brackets below the name of such company, wherever its name is printed, engraved or affixed.
  • One person can form only upto one (1) OPCs.
  • An OPC can be formed only by an Indian Resident and citizen.

Relaxations available to OPCs in comparison to general private limited companies

  • Provisions of Annual General Meeting (AGM) and Extra-Ordinary General Meetings do not apply to an OPC.
  • An OPC should have a minimum of one (1) director and a maximum of fifteen (15) directors. In case the Board consists of only one director, then the OPC is exempted from the requirement of conducting a Board Meeting as well.
  • It will be deemed to have complied with the provisions relating to Board meetings, if at least one meeting is conducted in each half of the calendar year. However, the gap between the two meetings should not be less than ninety (90) days.
  • There is no requirement of appointing a first director for the company. The sole member is deemed to be the first director.
  • The OPC is also exempt from provisions relating to notices of the meetings (Section 101), statement to be annexed to notice (Section 102), Quorum for Meetings (Section 103), Appointment of Chairman of Meeting (Section 104), Proxies (Section 105), Restriction on Voting Rights (Section 106), Voting by show of hands (Section 107), Voting by Electronic Means (Section 108), Demand for Poll (Section 109), Postal Ballot (Section 110) and Circulation of Member’s Resolution (Section111).

How is OPC different from sole-proprietorship?

You may initially wonder why should you form a company and not a sole-proprietorship? Well, think again! Or rather browse through the points below:

  • First and foremost, simply because OPC has a separate legal entity from its owners. In case of sole proprietorship, there is no distinction between the two entities. This means that the liability of the owner is separate from the entity. Or in other words, the threat of lien on personal property in case of unmet liabilities is non-existent.
  • Personal financial trustworthiness and credit ratings of the owner does not affect the ratings of the OPC, at least not directly.
  • Owing to the feature of it having a separate legal entity from its owners, the OPC is taxed separately, unlike a sole proprietorship.
  • Undoubtedly, the compliances in an OPC are a bit more tedious as compared to sole proprietorship. However, it can be termed as a small compensation compared to its superlative advantages.
  • A company form of business generally meant to bring forward two members at least for better degree of control over management. However, these intentions were wildly destroyed when people started bringing in members just for the sake of maintaining the minimum statutory limits. Also, for an entrepreneur, this seemed to be an inhibiting factor. Hence, the New Act brought about this new rationale of an OPC. This model gives an entrepreneur the necessary and much sought after freedom from the shackles of the risks and uncertainty of a sole proprietorship business.

Now, it will be worth watching how the corporate players react to this new regime. Visit us at Taxmantra.com for more details.

Alok Patnia

Alok Patnia

Alok Patnia founded Taxmantra.com to understand and address the pain points of individuals, businesses and startups. He is an expert in handling taxation issues, has great insights on the business startup issues such as choosing right business entity and also has vast experience in the field of business maintenance services such as accounting, auditing, company law compliances, service tax and other related fields. He is a qualified Chartered Accountant and a commerce bachelor from St. Xavier’s College having post qualification exposure with Ernst and Young and KPMG at Bangalore.