The One Person Company (OPC) was introduced through the Companies Act, 2013. Like partnership firms having an option to be a Limited Liability Partnership, sole proprietorship can look at a OPC.
This will increase better compliance and put OPC in a better position in availing loans/funding. This will bring in the unorganized sector or sole proprietorship into an organized sector. There are many advantages of being an OPC. Let us see them.
Before going into the benefits of being an OPC, let us see what is an OPC and how one can form it?
| Who is eligible to incorporate | A natural person who is an a. Indian citizen and b. Indian resident |
| Who is a nominee? | The memorandum of OPC shall indicate the name of the person, with his prior written consent, to become a member of the OPC when the sole member dies or becomes incapacitated to contract. A nominee can be a nominee in only one OPC. A nominee can be a member in an OPC. Where a member in One Person Company becomes a member in another OPC by virtue of his being a nominee in that OPC, then such person shall meet the eligibility criteria of being a member in only one OPC within a period of 180 days, i.e., he/she shall withdraw his membership from either of the OPCs within one hundred and eighty days |
| How many such OPC can a person register | A person can register only one OPC |
| What will be the nature of this OPC | OPC will be treated as a Private Limited Company |
| What will be the suffix | OPC will be suffixed to differentiate from other types of companies |
| What are the requirements relating to Director, shareholder | Shareholder : Min 1 Director : Min 1 Share Capital : No minimum Share capital / maximum : Rs.50 lakh Director and Shareholder can be the same person |
| Liability | Limited liability (only to the extent of shareholding) |
| Status | Enjoys the status of Pvt Ltd Company. |
Compliance matters
| Board meeting | Atleast one board meeting in each half of the calendar year The gap between 2 meetings shall be more than 90 days |
| Annual or Extraordinary General meeting | Only resolution to be communicated to the meber and minutes to be updated. |
| Quorum | No quorum required |
Mandatory conversion to Private Limited Company
In case the paid up share capital of an OPC exceeds Rs.50 lakh or its average annual turnover of immediately preceding three consecutive financial years exceeds Rs. 2 crore, then the OPC has to mandatorily convert itself into private or public company.
Advantages of an OPC
There are many advantages of being an One Person Company when compared to sole proprietorship. Am not comparing with Partnership, as here the individual wants to be on own and do not want to share the control of his business.
- Full control of business - faster decision making.
- Separate legal entity from the person
- Liability is limited
- Nominee facility available
- Having compliance requirement lesser than Private Ltd Co.
- Being with better compliance, higher chances of getting funding (loan or equity)
- Being a separate legal entity, can be sold at good valuation, if required.
- Director's remuneration is allowed as deduction while computing Income Tax
- Suitable for startups and MSMEs
- Better chances of being selected as vendor to provide service / good.
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