Starting a company can be tedious and time-taking. But over the years, it has become relatively easier to get your company registered in India. According to the World Bank, India’s ranking for “Ease of Doing Business” has improved from 142 in 2014 to 63 in 2022.
Depending on your choice and requirements, you can register your company in different forms such as private limited company, LLC, partnership, public limited company, etc.
In September 2013, when the new Companies Act, 2013 replaced its earlier version of 1956, it introduced One Person Company, a new type of company that individual founders can start.
If you are an entrepreneur who is looking to start your own One Person Company, read on to understand how to go about it.
What is a One Person Company?
The Companies Act 2013, introduced the concept of One Person Company (OPC) for the first time in India. It opened doors for founders who intend to start a company on their own without any co-founders.
Section 2(62) of the Companies Act, 2013 defines One Person Company as a company with one person as a member. You can incorporate an OPC with one person who can be the Director as well as a member of the company. There are lesser compliance requirements in an OPC compared to a private limited company.
Any Indian citizen or an NRI, except a minor, is eligible to incorporate a One Person Company and appoint a nominee who will run the company in case of the founder’s death.
Interesting Read: A Complete Guide to Different Types of Companies in India
Before the introduction of One Person Company, a single person could not start a company, except by starting a sole proprietorship.
However, there are a lot of differences between the two in terms of incorporation, tax liabilities, and operation, as defined in the table below:
| One Person Company | Sole Proprietorship |
| OPC is a separate legal entity other than the owner of the company. | A sole proprietorship firm has no such legal identity. |
| Director has limited liability. | The proprietor is liable for the company’s debts. |
| OPCs have to pay taxes that any incorporated company pays. | Since there is no distinction between the company and owner, the latter will pay taxes according to the tax slab. |
| More compliances to follow such as convening a board meeting, auditing financial statements, etc. | No mandatory compliances to follow. The exception is filing taxes. |
| The OPC functions according to its Memorandum of Association and Articles of Association. | It doesn’t require any such documents to function or make business decisions. |
Benefits of starting a One Person Company
An OPC is basically a corporate version of a sole proprietorship that enjoys the benefits of both entities.
Here are a few major advantages of One Person Company:
- Separate legal entity: The Companies Act, 2013, grants One Person Company a separate legal entity from its founder. This is a stark difference from starting a sole proprietorship.
- Limited liability: Due to the clause of OPC being a separate legal entity, you as a founder are legally protected from your company’s liabilities. Your liability is limited to your shares. You are personally not liable for the loss of the company. Thus, the creditors can sue the OPC and not the member or director.
- Fewer compliance activities: An OPC gets an exemption from activities related to compliance. While in effect an OPC is a corporation, it doesn’t have to follow all the compliance laws that a private limited company has to. Compliance activities such as filing cash flow statements, signing the book of accounts, and annual returns by the director are not required.
- Better access to funds: As an OPC is governed by the laws of the Companies Act, it can raise funds from institutional investors such as venture capitalists, angel investors, and incubators. Being a private company opens it up to receive loans from banks and other financial institutions.
- Less capital required for incorporation: You only need Rs 1 lakh as authorised capital to incorporate your One Person Company. Additionally, there is no minimum paid-up capital requirement, which makes it easier to incorporate as compared to the other forms of company.
Interesting Read: Benefits of Registering Your Business With Startup India
How to register a One Person Company?
Step 1: Digital Signature Certificate
Digital Signature Certificate (DSC) is an important and first document that you will need to incorporate your OPC. You will require the following documents to apply for a DSC:
- Address proof (Aadhar Card)
- PAN Card
- Photo
In addition to these, you also need to provide your email address and phone number at the time of application.
Step 2: Director Identification Number (DIN)
The next step is to fill up the SPICe form to get the Director Identification Number for the proposed director. You need to provide the director’s name and address in the form.
Step 3: Approval for the name
You will have to inform your company’s name to the Ministry of Corporate Affairs (MCA). The format of the name for a One Person Company should be like this – Name (OPC) Private Limited.
You can declare your company name in SPICe+ 32 application form. Along with the name, you are also required to provide the reason or context behind the name. In case the name gets rejected, you will have to do the whole procedure with a new name again.
Step 4: Filing company documents
The next step after getting DIN, DSC, and the name approved, is to prepare company documents and file them with the Registrar of Companies. These are the documents that you will need:
- The Memorandum of Association (MoA) and the Articles of the Association (AoA)
- Name of the company’s nominee who will act as the Director and member of the OPC, in the event of the death of the Director. The nominee’s consent is also needed along with his/her PAN and Aadhar card
- Address proof of the company’s office along with the proof of ownership and a NOC from the owner
- Declaration and consent of the proposed Director of Form INC – 9 and DIR – 2, respectively
- Certification from a professional declaring that all compliances were taken care of while filing for the incorporation
You have to upload all these documents along with the DIN, DSC, and SPICe Forms (separate SPICe forms for MoA and AoA) on the MCA website.
Step 5: Certificate of Incorporation
The RoC will verify all the documents and if everything checks out, it will issue the Certificate of Incorporation within a week.
Frequently Asked Questions
Question: What is the maximum number of directors a One Person Company can have?
Answer: There can be a minimum of one and a maximum of 15 directors in an OPC. If the company wants to increase the number of directors, it will have to pass a special resolution.
Question: Does a One Person Company enjoy any tax benefits compared to other types of companies?
Answer: No, there are no special tax benefits for OPCs.
Question: Can a person become a member of two OPCs at the same time?
Answer: The Companies Act does not allow for this. In case a person has agreed to become either a member or a nominee of two or more OPCs, he/she will have to withdraw the candidature within 182 days.
Question: Can an OPC later convert into a private or public limited company?
Answer: Yes, an OPC can convert into a private or public limited company after two years of operation. It will have to change its Articles of Association and Memorandum of Association. It will also need to increase the number of Directors and Members to match the minimum requirements for forming a private company.
