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What is One Person Company Registration in India?
Before the enactment of the Companies Act of 2013, establishing a company in India necessitated the involvement of at least two individuals. However, with the introduction of this legislation, there has been a notable shift towards promoting One Person Companies (OPCs). The Companies Act of 2013 specifically enables the formation and operation of OPCs in India, allowing a single individual to establish such entities. Unlike traditional private companies, which require a minimum of two directors and two members, a One Person Company diverges from this requirement by permitting formation by a single person. The legal framework supporting OPCs in India is delineated in Section 262 of the Companies Act of 2013. The process of OPC registration involves the representation of the entire company by a sole director and a single member. It’s important to note the simplified compliance structure associated with OPCs, which imposes fewer responsibilities compared to traditional private companies. This legal provision provides a streamlined pathway for individuals seeking to independently establish and operate companies in India.
Features of One Person Company in India Here are some key features of One Person Company in India:
- Simplified Succession: Despite being managed by a single individual in day-to-day operations, OPC allows for perpetual succession. In the event of a member’s demise, a nominee can take charge of the business.
- Limited Liability: Members of a one-person company enjoy limited liability. As OPC is a distinct legal entity, it offers members greater protection. Their liability is confined to their shareholding, absolving them of responsibility for the company’s losses. In case of bankruptcy, creditors can pursue the corporation rather than the director for repayment of company debts.
- Shareholder and Sole Directorship: In an OPC, a single member serves as the director, overseeing the company’s operations. There’s no need for an additional executive director. A sole member acts both as a director and a shareholder with full authority.
- Real Estate Ownership: As OPC is recognized as a separate legal entity, the individual can hold company assets, including real estate, in their name. Others cannot claim these properties, which may include machinery, residential or commercial structures, and other assets. The OPC has the legal capability to acquire land directly in its name.
Checklist for One Person Company Registration in India Below is the checklist for OPC Registration in India:
- Meeting Membership Standards: Ensure compliance with membership requirements, both at maximum and minimum levels.
- Nominee Selection: Select a nominee before incorporation.
- Nominee Approval Form: Submit Form INC-3 to request the nominee’s approval.
- OPC Name Selection: Choose a name for the OPC adhering to the Companies (Incorporation Rules) 2014.
- Minimum Authorized Capital: Maintain a minimum authorized capital of Rs. 1 Lakh.
- Digital Signature Certificate: Obtain a Digital Signature Certificate for the prospective director.
- Registered Office Proof: Provide proof of the One Person Company’s registered office.
Documents Required for OPC Registration in India Here are the essential documents needed for One Person Company Registration in India:
- Scanned Copy of Current Bank Statement: Access bank statements through Internet banking or from a bank branch. They may also be titled as account statements or transaction summary statements.
- Utility Bills: Include a phone bill, electricity or gas bill, and a mobile bill. Utilities encompass power, gas, water/sewage, and sometimes additional services like internet, cable TV, and phone service. These bills serve as crucial documents for OPC Registration.
- Transcription of Rental Agreement in English, Digitally: Typically, tenants receive hard copies of rental agreements, which need to be scanned and submitted for official documentation.
- Digital Copy of Landlord’s No-Objection Certificate: Issued by the landlord, this document is digitally transcribed. According to Section 12 of The Companies Act, 2013, every company must maintain a registered address. When incorporating a company in India, the registered address is provided in the SPICe+ form. If there’s a change in the company’s address post-formation, a Form INC-22 notifying the new registered address must be submitted to the ROC.
- Scanned Copy of Property or Sale Deeds in English (if Owned): Property or sale deeds are legal documents utilized in real estate transactions to confirm property purchase and ownership transfer from the seller to the buyer. This documentation serves as the primary evidence of ownership transfer and is also referred to as a conveyance deed or final deed.
Procedure for One Person Company Registration
Here’s the step-by-step procedure for One Person Company Registration in India:
Step 1: Succession Planning Although managed by a single individual, OPC allows for perpetual succession. In the event of a member’s demise, the nominee can take charge of the business.
Step 2: Limited Liability Members of a one-person company enjoy limited liability. OPC, being a registered corporation, is treated as a separate legal entity, offering members enhanced protection. Their liability is confined to their shareholding, shielding them from losses incurred by the firm. Creditors can pursue the corporation rather than the director in case of bankruptcy.
Step 3: Directorship In a One Person Company, a single member serves as both director and manages day-to-day operations. No additional executive director is required, as a single member holds full responsibility as a shareholder.
Step 4: Property Ownership As OPC is recognized as a separate legal entity, the individual can hold company assets, including real estate, in their name. Others cannot claim these properties, which may include machinery, residential or commercial structures, and other assets. OPC has the legal authority to acquire land directly in its name.
Step 5: Certificate Issuance The Registrar of Companies (ROC) issues a certificate of incorporation along with PAN and TAN.
Step 6: Bank Account Opening Open a bank account and commence business operations.
The entire OPC registration process can be completed in just 20 days. Contact RegisterKaro to expedite the process and initiate your business promptly.
Constraints of One Person Company
Despite its numerous benefits, establishing a one-person business entails several limitations:
- Limited Scalability: While opting for an OPC structure suits small businesses, it may hinder scalability. OPCs are restricted to one person at any given time, prohibiting the addition of more members and shareholders. Consequently, OPCs may struggle to attract additional investment, hindering corporate expansion.
- Restrictions on Commercial Activities: OPCs are prohibited from engaging in non-banking financial investment activities under prevailing regulations. This limitation restricts the freedom to invest in other companies’ securities upon registering as an OPC.
- Blurred Line between Ownership and Management: With a single individual serving as both director and manager, the distinction between ownership and management becomes unclear. All decisions rest solely with one person, potentially increasing the likelihood of unethical conduct.
Compliance Requirements
One-person companies must promptly adhere to specific legal obligations outlined in the Companies Act of 2013. Additionally, they may need to obtain local registrations as per the state laws where the OPC operates. The comprehensive list of compliance requirements, along with their timelines, is detailed below. For further discussions, reach out to one of our startup advisors.
Forms | Penalty |
---|---|
Appointment of 1st Auditor | Within 30 Days of Incorporation |
Issue of Share Certificate | Within 60 Days of Incorporation |
Stamp Duty Payment on Share Certificate | Within 30 Days of the Certificate Issue |
Filing of INC-20A (Declaration for Business Commencement) Registered Address maintenanceRegistered office details filingCurrent Bank Account openingEntire Subscribed Capital received | Within 180 Days of Incorporation, but before commencing business |