One Person Company Registration in India

The enactment of the Companies Act, of 2013 brought some very good and revolutionary changes in the system. It laid down the very necessary rules and regulations for the merging companies and gave them the power and the freedom to do their businesses suitably.

Among the various reforms of the Company Act, of 2013, one very important was the incorporation of One personal company. Before the enactment of this act, if an entrepreneur wished to start a business solely in his name, it was not possible. He or she had to go for a sole proprietorship form of company. This act laid the foundation of single-owner companies where only an owner and a director were required to run the business.

One-person companies are blissful for people who wish to start their business with only one person and don't want many people to get involved. This freedom has given rise to many budding entrepreneurs and has given them the courage to stand up for themselves.

Advantages of a One-Person Company

Threat free status

One-person companies have a separate identity and thus provide safety to the shareholder or the founder. The founder is only liable for up to his contribution in the shares of the company and is not bound to pay for any losses.

Great investment opportunities.

One-person companies seem great investment opportunities to angel investors, financial institutions, banks, etc. People are ready to invest in these companies rather than investing in bigger companies or proprietorship firms. Also, these companies can raise funds through venture capital, allotting shares.

Easy to form

One-person companies, as the name suggests, are easier to form as they need only one person as the member(can be the director too) and one nominee. Also, the required minimum capital investment is Rs 1 lakh.

Lesser Compliance means more freedom

As One-Person companies are single-member firms, they don't need to generate the cash for statements or get the accounts signed by the company secretary. The director can solely manage the accounts single-handedly and also, there is no need to hold general annual meetings.

Quicker resolutions

One-person companies come with the biggest benefit that they are easily manageable. The day-to-day decisions for any conflicts or issues arising can be solved quickly and more effectively as there is no hierarchy of professionals involved and every decision is centered around the director’s role.

The policy of perpetual succession

One-person companies too can follow the policy of perpetual succession and are not liable to be dissolved in the event of bankruptcy or the death of the owner. In such cases, the Nominee takes the place of the director and runs the business accordingly.

Requirements For Registering A One Person Company

• The first and foremost requirement for such a company is a single person/member who can be the Director as well.
• A nominee’s name is given by the owner/founder/ director to carry out the business in cases of death/ incapacity of the director. The Nominee should be an Indian national and needs to submit a consent form INC-3 to become a member of the company.
• Only one shareholder can be a member of the OPC. He or she should be a citizen of India and must execute the Memorandum and Articles of Association to run the business. Further addition of shareholders is not possible in the case of OPC.
• The shareholder/director must have a valid Digital Signature Certificate(DSC) issued by a certifying Authority. However, the nominee does not require a DSC.
• An OPC needs a minimum paid-up capital of Rs. 1 lakh. However, there is no minimum limit on the authorized capital, but the maximum limit for authorized capital is Rs.50 lakhs
• The founder/ promoter needs to select a company name as per the Guidelines issued by the Ministry of Corporate Affairs under the Companies Act, 2013.
• A registered office address for all the official communications.

How To Register One Person Company with a Filing Lounge?

The procedure of registration on the government portal can be quite lengthy and cumbersome. Filing Lounge has a distinctive section for different types of registration. Hence, You can opt for Registration of One Person Company with us. Here are the steps to be followed:

• Visit the website FilingLounge and under the Business Formation tab given on the homepage, choose One Person Company from the dropdown menu.
• The landing page displays a form that needs to be filled out by the applicant.
• Furnish all the fundamental details in the form and click on the Submit button.
• Once your form reaches our servers, and you make the payment online, our team of experts will assist you with a call shortly to carry forward your application process.

Disadvantages of OnePerson Company

Cannot Form Larger Businesses

If the paid-up capital exceeds Rs. 50 lakhs and the annual turnover of a one-person company exceeds Rs. 2 crores, the company needs to be converted into a Private Limited Company. Thus, for large businesses, a One-Person company is not a suitable option.

Tax Rates

One-person companies have to pay larger taxes and they cannot avail of the tax slab advantage which is in turn availed by other kinds of firms. OPCs have to pay 30 % income tax and this may seem quite unprofitable to many.

Higher Compliances

One-person companies have to go through higher cost compliances as compared to partnership firms or similar firms.

The Suffix OPC

One-person companies have to add the suffix One Person Company with their names and this might leave an impression that the company is solely run by a single person. This may create a feeling of distrust in the company and the owner.

One OPC At A Time

If the owner wishes to form another OPC, he or she cannot do so because he or she already has an OPC in his or her name. So, at a time, only one OPC can be incorporated in the same person’s name.

Decisions Are Completely Dependent On the Owner.

In One-Person companies, the entire decision-making and implementation process rests in the hands of the single owner and there is no guidance from any side. In cases where the owner lacks decision-making capabilities, the company may suffer huge losses.

Better To Form A PVT. LTD. If Expecting High Turnovers

If the OPC is functioning properly and expecting good turnovers, then the company should be formed into a Private Limited Firm, by the Companies Act, 2013. After the incorporation of OPC, it cannot be converted into a private limited company before two years.

Procedure to Convert An OPC Into A Private Limited Company?

An OPC can be converted into a private Limited Company on the given conditions:

• If the equity capital exceeds Rs. 50 lakhs or the annual turnover exceeds Rs. 2 crores, conversion of OPC into a Private Limited Company becomes necessary.
• Such a company will be required to convert itself within six months of the date on which the paid-up capital exceeds 50 lakhs or the last day of the relevant period during which its annual turnover exceeds 2 crores.
• The OPC should change its MOA and AOAs by passing a resolution as per sub-section (3) of Section 122 of the Companies Act, 2013.
• The OPC should give a notice to the ROC in Form INC-5 informing that it has ceased to be an OPC within 60 days.
• An OPC can be converted into a Private Limited Company after increasing the number of members and directors to 2 or a minimum of seven members and 2-3 directors.

Procedure to Convert a Private Limited Company into an OPC

• A private limited company with an equity capital of Rs. 50 lakhs or less and an annual turnover of Rs. 2 crores or less can be converted to an OPC by passing a resolution in the General Board meeting.
• Before conversion, the company needs to obtain an NOC in writing from its members and creditors.
• The company should file a copy of the special resolution with the ROC within 30 days from the date of passing of the resolution in Form MGT-14.
• The company should apply Form INC-6 along with the prescribed fee and the following set of documents:
  • Declaration letter confirming the consent of all the members
  • List of members and creditors
  • Currently inspected sheet of profit and loss account
  • Copy of NOC from, the creditors

Conclusion

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