A single individual own and manages sole proprietorship business. Sole proprietorships attract small investors as they are moderately easy to start. Also, the owner is allowed to get all the profit that the sole proprietorship acquires but the business owner is directly responsible for any debts, losses or violations that took part in the business. For example, if the business has to pay any debts, these will be cleared off from the owner's own personal funds and also business does not run if the owner becomes expired or injured as they are treated as one and the same.
Starting a One Person Company removes aforementioned issues and offers enhanced advantages for the small businessmen, traders and entrepreneurs since the registration and maintenance cost for the company is least. Incorporation of business as a One Person Company would make it a Separate Legal entity with continual succession and also with restricted liability. A One Person company (OPC) can be registered with a single individual as a director cum shareholder. One person company offers enhanced advantages as compared to proprietorship like legal Status, limited liability, and corporate identity, flexible in management, quick decision making, reduced taxation burdens and easy bank operation.
Distinct Legal Entity thus limited liability
Protection of personal assets of the company confirms that the owner possesses limited liability to the amount of his/her own share.
Easy to Handle Structure
The structure of One Person Company can be managed since there is only one member. There is no need to organize an annual or added ordinary general meeting. There is no need to wait for anyone's authorization as there is only one person who is the single authority to take decisions.
Better Trust and Confidence of Business
Big organizations have preference to deal with OPC rather than proprietorship firms. OPC is incorporated just like a private company and private companies are the trusted type of business that makes it easier to obtain funding from the financial institutions. It offers a sense of enhanced confidence in the business to its suppliers and customers.
The One Person Company offers a structure similar to a private limited company to the business and therefore creates it organized with the advantage of limited liability. A sole proprietorship cannot offer an organized structure.
Difficulty of Compliance
One Person Company will need to follow procurements applicable to private limited companies with different exclusions and thus it is compulsory to stick to less compliance associated burden.
Simple to obtain Loan from Banks
Banking and financial institutions choose lending money to the company rather than proprietary firms. In a large part of the scenarios, the entrepreneurs convert their firm into a Private Limited company before sanctioning funds. So it is recommended to register your start-up as a One Person company as compared to proprietary firm.
Annual return filing
Yearly return of One Person Company is needed to be signed by a director. The essential need of Company Secretary Signature is not pertinent to One Person Company.
Being an incorporated entity a One Person Company will suppose to have the section of continuous succession and will make it easier for entrepreneurs to increase capital for business. The One Person Company is an artificial unit from its proprietor.
No need to organize annual or Extra Ordinary General Meetings
Just the resolution might be passed by the member from the organization and entered in the minutes book and signed and dated by the member and such date should be regarded the date of meeting.
A One Person Company is needed to carry out only one meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings should not be less than 90 days.
Step 1 – DIN – Getting Director Identification Number
Step 2 – DSC – Obtaining Digital Signature Certificate
Step 3 – Company Name – Filing application for name approval
Step 4 – MOA and AOA – Preparing Memorandum of Association and Articles of Association
Step 5 – Filing E-Forms – Signing and Filing different documents that includes Memorandum off Association and Articles of Association in various E-forms regarding companies
Step 6 – Certificate of Incorporation - Receiving of Certificate of Incorporation from Registrar of Companies
Address Proof – Most up-to-date Utility bill / Bank statement in the name of director and nominee that should not be older than 2 months
Proof of Identity - Scanned copy of PAN Card of all nominees, directors and Voter ID/Aadhar card/ Driving License /Passport
Approval of Nominee - Written approval of nominee is needed to be filed with the Registrar of Companies (RoC)
Proof of Registered Office - No Objection Certificate (NOC) from the proprietor, utility bill (last 2 months) and notarized rent agreement (in the case of rented property)/ registry proof or house tax receipt (in the case of owned property)
Passport Photograph - Most recent passport sized photograph of the directors and nominee.
Requirement of the capital to start OPC and a private limited company are the same. It requires an authorized capital of Rs. 1 lakh to start with. But, none of this requires to be paid-up essentially. This denotes that there is no need to invest any money into the business. The capital should not exceed Rs. 50 lakh during incorporation.
As soon as a Company is incorporated, it will be active and comes into existence provided that the annual compliance is met on a regular basis. If annual compliance is not met with, the Company will become a Dormant Company and may be struck off from the register after a certain period. A struck-off Company can be revived for tenure of up to 20 years.
An OPC limited by shares must follow the following needs :
It should possess a minimum authorized share capital of Rs. 1 Lac.
Transferring shares to anyone else is not permitted.
An OPC is barred from offering any invitations to the public for subscribing to the securities of the company.
When the OPC limited by shares or by guarantee, comes into a contract with the only member of the company who is also the director of the company; the terms of contract or offer should be in writing. Also, the same must contain in a memorandum or recorded in the minutes of the Board meeting organized next after entering into the contact.
An OPC must notify the Registrar about every contract entered into by the company with the only member of the company within 15 days from the date of approval.
No, a person can create only 1 OPC at a time. The rule is the same for the nominee director also.
In order to register One Person Company (OPC) in India, it is compulsory to get the DSC (Digital Signature Certificate) and DIN (Director Identification Number) by all the directors and Subscriber to MOA (proprietor) with the Nominee. The Registered Office must exist for online registration of Private Limited Company.
The promoter of the company must ensure that the proposed name of the OPC for online registration is unique. Besides, all the documents regarding the subscriber, nominee and directors and Registered Office shall be according to the necessity.
You can convert an OPC into a private or public company only after 2 years from the date of incorporation.
The necessity for appointing a nominee is recommended to retain the nature of perpetual existence of the One Person Company. A nominee shall be a person and should be appointed at the time of incorporation of OPC. In the case of death or inability to take part into any contract by active member, the nominee will become the member of One Person Company.
The company should file form INC-4 in the case of discontinuation of member of OPC because of incapacity, death, contract or change in proprietorship. In the same form, user requires offering details of the new member of OPC.