What is one person company ?

What is one person company ?

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What is one person company in India?
What is one person company in India?

Introduction: The concept of One Person Company (OPC) in India was newly introduced through the Company Act, 2013 to guide entrepreneurs who on their own are capable of opening a venture by giving permission them to create a single person economic entity. One of the biggest profits of OPC is that there can be only single member in a OPC, while a minimum of two partners are required for organizing and maintaining a Private Limited Company or a Limited Liability Partnership. Similar to a Company, OPC is an independent legal entity from its members, attempt limited liability protection to its shareholders, has stability of business and is easy to organize.In the old Companies act 1956 a minimum of two directors and shareholders were required to start a private limited company. Yet in case of a one person company, only 1 person is needed for a shareholder as well as the director.

Though a One Person Entity grant a lone Entrepreneur to start a business with Limited Liability protection, OPC does have a less limitations. For instance, every OPC must nominate a nominee Director in the MOA and AKA who will be the owner of the OPC in case the organizer Director is disabled. Also,OPC will be reformed into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and will file audited financial statements with the help of Ministry of Corporate Affairs at the end of each Financial Year. Accordingly, it is essential for the Entrepreneur to anxiously consider the appearance of OPC important to incorporation. India Filings can help organize a One Person Company (OPC) in India.

ADVANTAGE OF ONE PERSON COMPANY

Separate Legal Entity

A company is a legal entity or a juristic person established under the Act. Accordingly a company form of organization has broad legal scope and can own property and also obtaindebts. There is no suchliabilityof members (Shareholders/Directors) of a company to the creditors of a company for such debts.

Single Owner

You, only the owner helpful in quick decision-making, controlling and managing the business without following any elongated processes and methodologies as adopted in other companies. The sense of belonging inspires to grow the business further.

Minimum Requirements:

  • Minimum 1 Shareholder
  • Minimum 1 Director
  • The director and shareholder can be the same person
  • Minimum 1 Nominee
  • Letters ‘OPC’ to be suffixed with the name of OPCs to distinguish it from other companies

OPC have to face little compliance burden as compared to private limited companies, hence OPC can more focus on other functional and core areas

Uninterrupted Existence

A company has ‘perpetual succession’, that is uninterrupted existence as far as it is legally dissolved. A company, actually a separate legal person, has no loss by the death or other departure of any member but continues to be in existence inattentive of the changes in membership.

Borrowing Capacity

A company appreciates better avenues for borrowing of funds. It can issue debentures, secured as well as unsecured and can also obtain deposits from the public, etc. Even banking and financial institutions choose to render large financial assistance to a company rather than partnership firms or proprietary concerns.

Easy Transferability

Shares of a company are limited by shares and transferable by a shareholder to anyone. Filing and signing a share transfer form and handing over the purchaser of the shares along with share certificate will easily transfer shares.

Owning Property

A company being a juristic person, can acquire, own, enjoy and alienate property in its own name. No shareholder can make any allegation upon the property of the company as long as the company is a going concern.

Limited Liability

Limited Liability means the status of being legally responsible only to a fixed amount for debts of a company. dissimilarproprietorships and partnerships, in a limited liability company the liability of the members in respect of the company’s debts is limited.

Terms and Restrictions of OPC

  1. A person shall not be eligible to organize more than a One Person Company or become nominee in more than one such company.
  2. Minor shall not become member or nominee of the One Person Company and they can’t get any beneficial interest for holding shares.
  3. An OPC cannot be organized or converted into a company under Section 8 of the Act. [Company not for gain].
  4. OPC cannot bring out Non-Banking Financial Investment activities including investment in securities of anybody corporate. 
  5. An OPC cannot convert voluntarily into any kind of company unless two years have lapse from the date of organization of One Person Company, except threshold limit (paid up share capital) is increased beyond Rs.50 Lakhs or its average annual turnover during the suitable 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 constantly file forms with the ROC for alteration in to a Private or Public Company, with in a period of Six Months on breaching the above threshold limits.

Steps to OrganizeOne Person Company (OPC)

  1. Obtain Digital Signature Certificate [DSC] for the proposed Director(s).
  2. Obtain Director Identification Number [DIN] for the proposed director(s).
  3. Select proper Company Name, and write an application to the Ministry of Corporate Office for availability of name. 
  4. Draft Memorandum of Association[MOA]and Articles of Association [AOA]. 
  5. Signature and file number of documents including MOA & AOA with the Registrar of Companies electronically. 
  6. Payment of Requisite fee to Ministry of Corporate Affairs and also Stamp Duty. 
  7. Analysis of documents at Registrar of Companies [ROC].
  8. Receipt of Certificate of Registration/Incorporation fromRegistrar of Companies ROC.

Conclusion:

The concept of OPC is new in India. Many people wanting to start a business are unaware of the concept. However,OPC will give great boost to the economyas individual can now form companies without the need of a partner. However it iswell-considered that the individual looking to start an OPC should take care of all the regulatory paperwork before starting a company. The OPC has many profits over sole proprietorship and treat the owner and company as separate legal entity.

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