What is One Person Company (OPC) under the Companies Act, 2013?

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By Hiral Vakil on February 18, 2019

Companies Act, 2013 introduced the concept of One Person Company (OPC) for entrepreneurs who wishes 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.  

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. Minimum authorised capital required for incorporation is Rs. 1,00,000.  For incorporation of OPC, a nominee must be appointed by the promoter and nominee cannot be minor.

Who can not incorporate One Person Company (OPC)?

Following entities and businesses can not incorporate 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?

Following 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 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 director are also allowed as deductible expenses which reduces 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 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 is also beneficial since banking and financial institutions prefer to lend money to the company rather than proprietary firms.   

FAQs:

1.Can a person be a member in more than one OPC?

No, a person can not be a member in more than one OPC. And if a person who is a member of one OPC becomes a member in another OPC by virtue of his being a nominee then he shall meet the eligibility criteria of being a member in only one OPC within a period of 180 days. In simple words, he shall withdraw his membership from either of the OPCs within 180 days.  

2. Is nominee mandatory for incorporation of OPC?

Yes, One Person Company can not be incorporated without nominee. Nominee is an individual who will take place of a sole promoter in case of death or incapacitation of the sole promoter. Nominee must be over the age of 18 years and must be an Indian citizen and Indian resident.