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One Person Company: Full Step By Step Overview

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[Updated: Oct 2015]

One person company is a new concept in India which has been introduced by the companies act 2013. In the old Companies act 1956 a minimum of two directors and shareholders were required to form a private limited company. However in case of a One person company, only 1 person is required who can be a shareholder as well as the Director. Hence the name, One Person Company.

One Person Company Concept

The concept opens up spectacular possibilities for sole proprietors and entrepreneur who can take the the advantages of Limited liability and corporatization but were held back in doing so because of the requirements of finding a second director or second shareholder.

A small note on what is meant by limited liability

The biggest difference between a sole proprietor and a One Person Company would be that in case of a One Person Company, your liability in case the business fails, is limited to only the business assets. In case of a proprietorship, the liability is unlimited and the creditors of your business can even take hold of your home and personal assets like your house, personal bank accounts, jewellery etc which can be used to settle the business liabilities.

Concepts Behind One Person Company

1. One share holder:

This is the fundamental concept of a One Person Company. In fact, One Person Company is defined in the Companies Act as a Company which has only one member. A single shareholder holds 100 percent shareholding.

The thing to be kept in mind is that the Company Incorporation Rules provide that only a natural person who is a resident of india and also a citizen of india can form a one person company. It means that other legal entities like companies or societies or other corporate entities cannot form a one person company.

Further it also means that Non resident Indians or Foreign citizens can not form a One person company. Further the rules also specify that a person can be a shareholder in only one one person company at any given time. It simply means an individual cannot have two different one person companies in his name.

2. One Director

The other important point is that a One Person Company may have only one director. But at the same time there is no bar on more number of directors. However, as per the Act, the total number of directors shall not be more than 15.

As per the Companies Act, if nothing is mentioned in the incorporation document, it would be assumed the sole shareholder shall also be the sole director in the one person company and which shall be practically the case in most One Person Companies incorporated.

3. Nominee

This is a very important concept where the person forming the One Person Company has to nominate a Nominee with his written consent who, in the event of death or inability to contract of the owner of the One Person Company, shall come forward and take over the reins of the one person company.

Please note that the requirements of being a resident Indian and citizen of India also apply to the nominee. Further if the person so nominated becomes the member of such a One Person Company and is already a member of another One Person Company, at the same time, by virtue of rules has to decide within 6 months which one person company he has to continue. One more thing, the member can change the nominee at any point of time.

On the death of the sole member, the nominee shall be the person recognized by the company as having title to all the shares of the member. Such nominee shall be entitled to the same dividends and other rights and liabilities to which such sole member of the company was entitled or liable.

On becoming member, such nominee shall nominate any other person with the prior written consent of such person who, shall in the event of the death of the member, become the member of the company

4. Taxation

Since nothing has been specified as such by the finance ministry, it is assumed that the rates of taxation applicable for a private limited company shall apply to a One Person Company. Net profits, which are calculated by deducting all allowable expenses from the turnover of sales, shall be taxable at the rate of 30 percentage + education cess.

5. Freedom from compliance

One Person Company also gets freedom from complying with many requirements as normally applicable to other private limited Companies. Certain sections like Section 96, 98 and sections 100 to 111 are not applicable for a One Person Company. Some of these are mentioned below:

–  No requirement to hold annual or extra ordinary general meetings. Only the resolution shall be communicated by the member of the company and entered in the minutes book and signed and dated by the member and such date shall be deemed to be the date of meeting.

– For the purposes of holding board meetings, in case of a OPC which has only One director, it shall be sufficient compliance if all resolutions required to be passed by such a company at a board meeting are entered in a minute book – signed and dated by the member and such date shall be deemed to have the date of the board meeting for all the purposes under Companies Act, 2013.

– No requirement of preparing cash Flow in the annual financial statements

– Annual returns can be signed by the Director himself instead of A Company Secretary

6. Related Party Transactions

Where One Person Company enters into a contract with the sole owner of the company who is also the director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer are contained in a memorandum are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract.

Further, the company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors under sub-section (1) within a period of fifteen days of the date of approval by the Board.

This clause shall be very much in vogue since the business of the One Person Company may use many assets of the owner and may pay compensation for that. Examples may be rent paid for using property or machinery or Furniture owned by the Owner. It may pay interest on loans taken from the owner. It may pay salaries to the Owner. All these contracts are covered under the section.

7. Process of One Person Company Incorporation:

The process of incorporation of a one person company is a very simple one.

First the sole shareholder shall get a Director Identification Number (DIN) as well as a digital signature certificate.

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Then he should apply for the name of the company

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After that he should get the consent of the nominee in the prescribed forms.

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Then he shall file the consent along with the final incorporation forms with the Memorandum and Articles and other required documents

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After that he shall receive the final incorporation certificate from the register of companies. Now he can commence business under the name.

Please note that that the words ‘‘One Person Company’’ shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.

8. Conversion from one person company to Pvt Ltd and vice versa

It is provided in the Act that when a One Person Company reaches a paid up Capital of 50 lakh rupees or more or when the average turnover of the company which is Rs. 2 Crores or more for a period of 3 years, then the company shall be converted into a private limited company after making the necessary changes in the memorandum of association and articles of association and shall comply with all the requirements of a private limited company.

Conversion of a private limited company into a one person company- A private limited company which does not have a paid up capital of more than Rs. 50 lakhs or where the average annual turnover for the past 3 years is less than Rs. 2 Crores can convert itself into a One Person Company and enjoy the benefits as such.

Conclusion:

This is a concept that is expected to give big impetus to Corporatization in the country. The only care to be taken is that there should be no regulatory mess ups like the ones which hampered the growth of Limited Liability Partnerships in this country. Otherwise the rules framed so far with respect to One Person Company have been very sensible.

[box type=”shadow” ]Disclaimer: The author CA. Bhavesh Savla is a practicing Chartered Accountant based at Mumbai. Please contact him at [email protected]cabks.in or visit www.cabks.in in case of any further queries about One Person Company. Please note that this write-up is intended to give a general overview and under no circumstances, can be taken as actionable professional advice. No liability rests or exists or is created against the author for any action taken by anyone on the basis of this article.[/box]

"One Person Company: Full Step By Step Overview", 5 out of 5 based on 2 ratings.
  1. DINESH KUMAR NATH TIWARI says

    Dear Sir,
    Need your help in knowing the procedure of OPC formation and its function.If a person form the OPC is it compulsory to work under it and file the tax even if no work has started under it .

  2. web designers hyderabad says

    good article with lot of information it was very useful.thank you for providing it.

  3. Dhara says

    Hello Bhavesh,

    Thanks for the information on OPC. Can you please let me know the registration fees for this and also if there is any yearly charges.

  4. kamlesh patel says

    i’m farmer and want to start opc for export [ agricultural product ] what is yr opinion for my wish…am i on right way…? pls. give me answer in nearest time…again thanx……

  5. shanti prajapati says

    i want to start a one person company to work with erp in schools and collages.tell me what to do first to register the company.what document will be require

  6. akram shaikh says

    i want to stat a garments businees and pus online shhopping how much capital is required for opc
    want documents is required in start
    wgat if my company faces loss,,, i have to pay sometghing to goverment.. i am not manufactures so i have to make service tax.. shoukld i have to make income tax.. should i need of current account.. if i start manufacturing should i have to get the luicence of manufacturing

  7. govardhan says

    Hi Sir,

    I am planning start one e-Learning website with payment gateway world wide, and I would like register as OPC kindly let me know the complete process with documents with registration fee. or let me know better to start with sole proprietorship, here my intentions is I have 15+ yrs of experience in IT, if am not succeed in this business I would like to go back to IT as a director position. Pls suggest me ASAP.
    Thanks in advance,

    Regards,
    Govardhan

  8. ayus says

    sir, I want to start online shop with opc please send me details of price and time taken

  9. amani says

    sir, i want to start online shop with opc please send me details of price and time to start my opc and recommend me which is best opc or prop

  10. bhavesh somani says

    Dear Mr. Bhavesh,

    I want to start supply/trading business for armed forces. Please advise whether LLP OR OPC can do business with them. Can you please advise as what is pros and cons of both form of incorporation. What are charges for both form of incorporation

  11. Chetan Lohia says

    Sir, I am owner of a proprietorship concern which owns a land and building. If I convert it into OPC, could the assets be transferred to OPC without paying stamp duty? If yes, what would be the procedure? Thanking you

  12. one person company says

    Thanks so much for his information a in One Person company can be easily manage

  13. Venmukil says

    Sir,
    What is the minimum duration to get OPC? I have a plan to start tech meet in regular interval. I need a registered name for it. For time being can I kickstart the event and later register for the name? Will there be any issues?

  14. rajan says

    hello!
    I wanted to start an OPC .Just wanted to know the cost involved as fees in getting the opc registered.

  15. zia says

    hi
    A french nationality can open OPC in india?

    1. CA. Bhavesh Savla says

      No, Only an resident Indian can open an OPC in India. The Companies (Incorporation) Rules, 2014 are specific on this point.

      A French national can open a private limited Company to further his business in India.

      CA. Bhavesh Savla
      [email protected]

  16. Deepu says

    Sir, If I start an opc (Web designing) company in one state of India and in future can I start the branches of the company in the same state and in other states also, Is it possible and is there any registration process required for that.

  17. vinita says

    Sir,
    If an ROR individual forms an OPC then want to have any foreign national to join the business will they have to convert the OPC into LLP or company ? is it beneficial to take him as director/ partner or associate.
    what should be status of entity then .

    1. CA. Bhavesh Savla says

      @vinita,
      To have a foreing national, it will be converted into a LLP or Company. pls remember that voluntary conversion of OPC to Pvt LTD cant happen within 2 years of incorporation. so u need to wait for 2 years after date of incorporating an OPC. If you have not yet formed an OPC and are expecting or looking out for Foreign investment, better to go for a pvt ltd company at the outset.

  18. Mehul says

    Sir,

    Can i opt for OPC if i am willing to PROVIDING EDUCATIONAL CONSULTANCY INDIA..? and Abroad..?
    As a consultant i am very positive and happy about OPC..?

    1. CA. Bhavesh Savla says

      Yes you can Mehul.

      CA. Bhavesh Savla
      http://www.cabks.in

  19. santosh says

    Hi,

    I want to form OPC for developing software product so whats the approximate total cost and duration from start to end process for founding OPC?

  20. S Bhansali says

    How to Issue of Share Capital in OPC ?

    1. CA. Bhavesh Savla says

      Same procedure as that of a pvt ltd company.

  21. Ashish says

    One person company is a really nice concept & help young entrepreneurs to start their own business.

  22. chandra shekhar says

    What is the total fees including service tax for converting OPC to Pvt ltd?

    1. Bhavesh Savla says

      Please send your email ID or contact number. We shall contact you about this.

      1. Viswanath says

        Hey Bhavesh, I have a doubt. I am a resident of India but I am yet to become a major. Am I allowed to legally register a OPC under my name?

  23. Rakesh singh yadav says

    Sir how to make opc company.

    1. Bhavesh Savla says

      The article covers that part. In case you do require some more detaild information. you can mail me at [email protected]

  24. prasad says

    how can i change the nominee of the opc
    is that any consent of current nominee requied.
    assume i am opc director.

  25. Alisha says

    Hi… Can someone mail me the Resolution for conversion of Private Limited company into OPC. Thanks in advance.

  26. abhishek says

    Pls let me know..whether individual directors can transfer its assets into the Pvt. Ltd.

    If possible..what are the ways to do so ?

    1. CA. Bhavesh Savla says

      Yes They can. Valuation needs to be done for the assets. But if the assets are intangible assets or IPR or transfer of technology then the rules for sweat equity needs to be followed.

      CA. Bhavesh Savla
      http://www.cabks.in

  27. kumar says

    OPC is one of the easiest forms of corporate entities to manage. Very few ROC filing is to be filed with the Registrar of Companies (ROC). No need to conduct Annual General Meeting (AGM)

  28. Gaurav Kumar says

    How to make opc company.

  29. Thomas says

    In the case of a one person company how will the company name be mentioned? For example a private limited is called xxxx Pvt. Ltd. How will the one person company name look like?

    1. CA. Bhavesh Savla says

      it will appear as ABC OPC Private Limited

    2. CA. Bhavesh Savla says

      Small correction. It will appear as ABC Private Limited (OPC)

      CA. Bhavesh Savla
      http://www.cabks.in

    3. Saurabh Soni says

      It will appear like xxx private limited (One Person Company)

  30. NIKITA SHAH says

    what is the procedure for converting the private limited co. into One person Co. ?
    Can i get the detailed procedure for the same..?

  31. CA. Bhavesh Savla says

    Hi Tushar,

    If there are sustainable revenues already, then you can look for OPC. But if you are a small business set up, first go for proprietorship and then you can convert it into OPC after seeing some sustainability.

  32. […] One person company is a new concept in India which has been introduced by the companies act 2013. In the old Companies act 1956 a minimum of two directors and shareholders were required to form a private limited company. […]

  33. Tushar says

    Thanks so much for this information & is a nice heads-up in the direction who looking forward to form a company.

    Question..

    However, what would be your suggestion for such new setups — whether being a proprietor, especially to start with is the most appropriate choice or going ahead with OPC ?

    Thanks again.

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