When we think of a company, we think of a team of people multitasking and attending board meetings. Venturing into the business world on your own is exciting yet intimidating. The concept of One Person Company serves as a great option for Individuals planning to run a company on their own without any partner or co owners.
In 2005 The Dr. JJ Irani expert panel recommended the concept of One Person Company. The panel was of the opinion that, this concept will benefit small business owners and provide opportunities and incentives for entrepreneurs and innovators.
WHAT IS A ONE PERSON COMPANY?
The Section 2(62) of the Companies Act, 2013 defines One Person Company or OPC as a business entity with only one member and one shareholder. The maximum number of directors can go up to 15. If the paid up share capital of an OPC exceeds fifty lakh rupees or two crore rupees, the OPC has to convert itself into a Private company or public company within six months.
The One Person Company enjoys the same benefits provided to the Private Limited Company. It also receives legal protection and limited liability. As of December, 2020 there are 34,235 active One Person Companies in India.
FEATURES OF ONE PERSON COMPANY
According to Section 3 of the Companies Act, 2013 OPC is a private company. It enjoys benefits similar to a private company. It receives access to credit, legal protection and bank loans.
- Number of Members
An Entrepreneur can set up a One Person Company as it requires one member and one shareholder. The OPC can have minimum of one director and maximum of 15 directors. Such structure helps companies which are still in the initial stages of development.
- Nominee of Shareholder
A shareholder has to mention a nominee while registering the company. The nomination takes place according to the Memorandum of the Company. This feature is unique and only available for One Person Company.
- Perpetual succession
Perpetual succession means a continued existence of an entity. The One Person Company has one member, on the death or incapacity of the member. The nominee can choose to run or dissolve the company.
- No minimum share capital
Funding is the most important element of forming a company. The One Person Company does not require a minimum paid up share capital.
HOW TO REGISTER A ONE PERSON COMPANY IN INDIA?
- The applicant has to obtain a Digital Signature Certificate (DSC) and Directors Identification Number.
- The applicant has to file an application to reserve the company name. The application can be made using the website named RUN (Reserve Unique Name). The applicant has to pay a prescribed fee of Rs.1000 along with application. If the application is approved the name is reserved for a period of 20 days.
- Memorandum of Association and Article of Association are two of most essential components of registering a company. It includes the structure, objectives and mode of operation of the company. The applicant has to file Form SPICe MOA and Form SPICe AOA with the Registrar of Companies.
- After submitting the application and Registration fees. The ROC shall approve the application and issue a Certificate of Registration.
DOCUMENTS REQUIRED FOR REGISTRATION OF ONE PERSON COMPANY-
- PAN Card of Owner
- Passport Size Photograph
- Copy of Aadhaar card
- Copy of Rent Agreement
- Copy of voter ID
- Latest Electricity bill
- NOC from Landlord (in case of rented premise)
BENEFITS OF ONE PERSON COMPANY
- The shareholder’s liability is limited to his shares or contribution to the company. This means any loss or debts in business will not impact, personal savings or wealth of the individual shareholder.
- The One Person Company is a legal entity. It can continue to exist even after the death or incapacity of the sole director or member. It would pass on to the nominee director nominated by the shareholder and continue to exist until dissolved. To grant the nominee the Right to run the company, a nominee clause is added to the MoA and AoA.
- The One Person Company has access to all the privileges given to a Private Company. This makes OPC a credible entity. It has fewer compliance requirements too.
UNION BUDGET 2021-2022 AND ONE PERSON COMPANY
The Union Budget 2021-2022 has proposed incentives for the incorporation of One Person Companies (OPCs). The following incentives were proposed and will benefit 200,000 companies the proposed changes will come into effect from 1 April 2021.
- OPCs can grow without any restrictions on paid up capital and turnover.
- The OPC can convert itself into any other type of company.
- The residency limit has been reduced for an Indian citizen to set up an OPC from 182 days to 120 days.
- Non-Resident Indians (NRIs) can incorporate OPCs in India.
- Tax benefit incentives have been proposed for startups
ARE YOU LOOKING FOR A HASSLE FREE ONE PERSON COMPANY INCORPORATION?
ezyLegal can help you register and incorporate your One Person Company and provide you with the right legal guidance. You can schedule your Consultation with an ezyLegal Lawyer and know the detailed process and advantages of registering your Company.