BackOne Person Company (OPC)
OPCs are ideal for solo entrepreneurs, freelancers, and small business owners who want to maintain control while enjoying limited liability protection.
REGISTRATION OF ONE PERSON COMPANY (OPC) IN INDIA
WHAT IS AN OPC?
Section 2(62) of the Companies Act, 2013, “One Person Company” means a company which has only one person as a member.
OPC is a type of business entity that allows a single individual to operate a company with limited liability protection.
WHAT ARE THE FEATURES OF OPC?
- Single owner: Only one person can own and manage the company.
- Limited liability: The owner's personal assets are protected in case of business debts or liabilities.
- Separate legal entity: The company has its own legal identity, separate from the owner.
- Compliance requirements: OPCs must comply with relevant laws and regulations, such as filing annual returns and tax returns.
- Name: The company name must include "OPC" or "One Person Company" to indicate its status.
WHAT IS THE PROCESS OF SETTING UP AN OPC?
- Reservation of name by filing SPICe+ Part A form: SPICe+ Part A form is an online application for registering a new company in India. Ensure that the selected name is unique and includes "OPC" or "One Person Company".
- Obtain DSC (Digital Signature Certificate): Required for filing documents online.
- Filing SPICe+ forms: Spice+ form is an online application for incorporation, which is to be filed after name approval and it is consists of SPICe+ Part B, INC-33 (e-MOA), INC- 34 (e-AOA), Agile pro and INC-9, along with necessary attachments.
- The entire process usually takes 7-10 working days, subject to ROC processing times and document accuracy.
- Certificate of incorporation: MCA after proper verification of documents submitted with the SPICe+ forms and upon approval, issues the Certificate of Incorporation (COI) as proof of company registration.
Documents required:
- ID proof (Aadhaar, PAN, etc.)
- Address proof (utility bills, etc.)
- Passport-sized photographs
- Rent agreement or property documents (for registered office)
- NOC (No Objection Certificate) from the landlord (if applicable)
WHAT ARE THE BENEFITS OF OPC?
- Limited liability: Protects personal assets from business risks.
- Sole control: Single owner has complete control over the company.
- Easy to manage: Simple compliance requirements and fewer regulatory formalities.
- Credibility: OPCs are considered more credible than sole proprietorships.
- Business continuity: OPCs can continue to operate even if the owner is unable to manage the business.
WHAT ARE THE LIMITATIONS OF OPC?
- Limited Fundraising: OPCs cannot raise funds from multiple investors or venture capitalists.
- No Investment in Other Companies: OPCs cannot invest in other companies.
- Limited Business Activities: OPCs can only engage in specified business activities.
- No Change in Ownership: The ownership cannot be transferred or changed.
- Limited Size: OPCs are suitable for small businesses, not large-scale operations.
WHY OPC IS BETTER THAN PRIVATE COMPANY?
- Simplified Compliance: OPCs have fewer compliance requirements compared to private companies.
- Single Ownership: OPCs allow for single ownership, giving the owner complete control.
- Limited Liability: OPCs offer limited liability protection, safeguarding personal assets.
- Easy to Manage: OPCs are simpler to manage, with fewer formalities and paperwork.
- No Need for Board Meetings: OPCs are exempt from holding board meetings.
- Less Stringent Accounting Requirements: OPCs have less stringent accounting and auditing requirements.
FAQ’s
Q1: What is a One Person Company (OPC)?
A1: An OPC is a type of private company with only one shareholder and director.
Q2: Who can form an OPC?
A2: Any individual, including professionals and entrepreneurs, can form an OPC.
Q3: What are the benefits of an OPC?
A3: Benefits include limited liability, single ownership, simplified compliance, and tax benefits.
Q4: Can an OPC have more than one director?
A4: No, an OPC can only have one director, who is also the shareholder.
Q5: Can an OPC raise funds from investors?
A5: No, OPCs cannot raise funds from multiple investors or venture capitalists.
Q6: Can an OPC convert to a private company?
A6: Yes, an OPC can convert to a private company after two years.
Q7: What is the minimum authorized capital for an OPC?
A7: There is no minimum authorized capital requirement for an OPC.
Q8: Can a foreign national form an OPC??
A8: No, only Indian citizens and residents can form an OPC.
Q9: Can an OPC own property?
A9: Yes, an OPC can own property in its own name.
Q10: What are the compliance requirements for an OPC?
A10: OPCs must file annual returns, tax returns, and other necessary documents with the Registrar of Companies (ROC).
Q11: Can an OPC be dissolved?
A11: Yes, an OPC can be dissolved voluntarily or by the ROC in case of non-compliance.
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Frequently Asked Questions
Chartered Accountants (CAs), Tax Return Preparers, Tax Consultants and Certified Tax Professionals are the experts in India who can guide and file returns.
Private Limited Company set-up process typically takes around 10-12 working days. However, it can vary depending on several factors, such as the speed of document submission, verification, and approval from the authorities.
Selection of suitable entity structure for a startup involves considering several factors such as:
1. Business Goals: Define your startup's mission, vision, and objectives.
2. Ownership: Determine the number of owners (sole proprietorship, partnership, or multiple owners).
3. Liability: Consider the level of personal liability protection needed.
4. Taxation: Think about tax implications.
5. Funding: Will you need to raise capital from investors or lenders?
6. Growth Plans: Consider future expansion, mergers, or acquisitions.
7. Compliance: Evaluate the regulatory requirements and compliance burden.
8. Flexibility: Assess the need for flexibility in decision-making and management.
Common business structures for startups:
1. Sole Proprietorship: Simple, low-cost, but offers no liability protection.
2. Partnership: Shared ownership, but partners have personal liability.
3. Limited Liability Partnership (LLP): Combines partnership benefits with liability protection.
4. Private Limited Company: Offers liability protection, tax benefits, and credibility.
5. Limited Liability Company (LLC): Flexible with liability protection.
1. Business Goals: Define your startup's mission, vision, and objectives.
2. Ownership: Determine the number of owners (sole proprietorship, partnership, or multiple owners).
3. Liability: Consider the level of personal liability protection needed.
4. Taxation: Think about tax implications.
5. Funding: Will you need to raise capital from investors or lenders?
6. Growth Plans: Consider future expansion, mergers, or acquisitions.
7. Compliance: Evaluate the regulatory requirements and compliance burden.
8. Flexibility: Assess the need for flexibility in decision-making and management.
Common business structures for startups:
1. Sole Proprietorship: Simple, low-cost, but offers no liability protection.
2. Partnership: Shared ownership, but partners have personal liability.
3. Limited Liability Partnership (LLP): Combines partnership benefits with liability protection.
4. Private Limited Company: Offers liability protection, tax benefits, and credibility.
5. Limited Liability Company (LLC): Flexible with liability protection.
The Presumptive Taxation Scheme (PTS) offers several benefits to small businesses and professionals:
1. Simplified Accounting: No need to maintain detailed accounts and records.
2. Estimated Income: Tax is calculated on an estimated income, rather than actual profits.
3. Reduced Compliance: No requirement to get accounts audited.
4. Lower Tax Liability: Tax is calculated at a prescribed rate.
5. Exemption from Tax Audit: No requirement to get tax audit done.
6. Easy Calculation: Profit is calculated on a fixed percentage of gross receipts.
1. Simplified Accounting: No need to maintain detailed accounts and records.
2. Estimated Income: Tax is calculated on an estimated income, rather than actual profits.
3. Reduced Compliance: No requirement to get accounts audited.
4. Lower Tax Liability: Tax is calculated at a prescribed rate.
5. Exemption from Tax Audit: No requirement to get tax audit done.
6. Easy Calculation: Profit is calculated on a fixed percentage of gross receipts.
No, you cannot obtain two Director Identification Numbers (DIN) for two companies. DIN is a unique identifier assigned to an individual who is a director or proposed to be a director of a company. If you want to be a director in two companies then you can use the same DIN for both companies.
Yes, it is mandatory to maintain records of all financial transactions for your business. The Companies Act, 2013 and the Income Tax Act, 1961, require businesses to maintain accurate and complete financial records and it should be accurate; up-to-date; easily accessible for inspection by authorities and must be retained for a minimum of 8 years.
Maintaining financial records helps:
1. Track business performance: Accurate records can help you track your business performance, identify opportunities and problems and compare your business to others.
2. Prepare financial statements: Accurate records are needed to prepare financial statements, such as income statements and balance sheets. These statements can help you manage your business and deal with creditors and banks.
3. File tax returns: Accurate records can help you comply with tax laws and avoid penalties.
4. Detect and prevent fraud: Accurate records can help prevent and detect fraud and theft.
Failure to maintain proper financial records can result in penalties, fines, and legal issues.
Maintaining financial records helps:
1. Track business performance: Accurate records can help you track your business performance, identify opportunities and problems and compare your business to others.
2. Prepare financial statements: Accurate records are needed to prepare financial statements, such as income statements and balance sheets. These statements can help you manage your business and deal with creditors and banks.
3. File tax returns: Accurate records can help you comply with tax laws and avoid penalties.
4. Detect and prevent fraud: Accurate records can help prevent and detect fraud and theft.
Failure to maintain proper financial records can result in penalties, fines, and legal issues.
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