Companies Act, 2013 introduced the concept of One Person Company (OPC) for entrepreneurs who want to create a single person economic entity. Similar to a Company, a One Person Company is a separate legal entity from its promoter and it is easy to incorporate. One Person Company (OPC) allows a single member to Incorporate and run a business. OPC should be incorporated on MCA Portal.
Who can incorporate One Person Company (OPC)?
Any individual who is an Indian citizen and resident of India in the previous financial year can incorporate OPC. A Resident of India means a person who has stayed in India for more than 182 days during the previous year. The minimum authorised capital required for incorporation is Rs. 1,00,000. For incorporation of OPC, the promoter must appoint a nominee and the nominee cannot be minor.
Who can not Incorporate One Person Company (OPC)?
- Legal entities like Company, LLP, Trust, AOP, BOI can not incorporate OPC.
- Any businesses involved in financial activities can not incorporate OPC.
- Any businesses covered under section 8 of the Companies Act,2013 can not incorporate OPC.
- Non- Resident, Foreign Citizen and Minor individuals can not incorporate OPC.
- OPC cannot be incorporated if the paid-up capital is more than Rs. 50,00,000 and the turnover is more than 2 crore rupees.
What are the benefits of incorporating OPC?
- Separate Legal Entity
One Person Company is a separate entity from its promoter/ member. It is capable of doing business in its own name.
- Control with the single owner
It becomes easy to control and manage any entity if there is a single owner. By incorporating One Person Company (OPC) an owner can take quick decisions and focus on the growth of the business.
- Minimal Compliances
In the case of One Person Company (OPC) compliances are also less compared to a private limited company. No requirement to hold an annual or extraordinary general meeting, only one meeting of the Board of Directors is required each half of a year. Form filing with the Registrar of Company (ROC) is also lesser than a private limited company. Any remuneration paid to the director will be allowed as deduction as per income tax act. Any rent or interest paid to the director is also allowed as deductible expenses which reduce the profitability of the company.
- Easy Transferability
Since there is a single person holding 100% of shares of One Person Company (OPC), it is easy to transfer the ownership of company by transferring the shares.
- Ease in obtaining a loan from the bank
One Person Company can avail of the benefits of Small Scale Industries and can obtain funding from the bank without depositing any securities to a certain limit. Incorporating One Person Company (OPC) is also beneficial since the banking and financial institutions prefer to lend money to the company rather than proprietary firms.
No, a person can not be a member of more than one One Person Company. And if a person who is a member of One Person Company becomes a member of another One Person Company by virtue of his being a nominee then he shall meet the eligibility criteria of being a member in only One Person Company within a period of 180 days. In simple words, he shall withdraw his membership from either of One Person Company within 180 days.
Yes, One Person Company can not be incorporated without a nominee. The nominee is an individual who will take place of a sole promoter in case of death or incapacitation of the sole promoter. The nominee must be over the age of 18 years and must be an Indian citizen and Indian resident.
Tax rates on an OPC are the same as of a Private Limited company. Thus OPC is liable to pay tax at the flat rate of 30% plus 2% education cess and 1% secondary higher education cess. Also, surcharge at 5% is levied if the turnover exceeds Rs. 1 Cr. similar to a Private company.