One person company registration

What it is

An OPC is a hybrid between a sole proprietorship and a company, introduced by the Companies Act, 2013. It has only one member, who acts as both shareholder and director. A single entrepreneur can run the business alone and still get a separate legal entity, limited liability, access to bank credit and legal protection for the business.

The member must name a nominee in the MOA. The nominee gives written consent and becomes the member if the original member dies or becomes incapable of contracting.

Requirements

• One shareholder, one director and one nominee. The shareholder and the director can be the same person. Up to 15 directors can be appointed.
• The member and the nominee must be natural persons and Indian citizens. Since 1 April 2021 a person who has stayed in India for at least 120 days in the previous financial year qualifies as resident, and non-resident Indians can also form an OPC.
• A person can be a member of only one OPC at a time, and a nominee in only one OPC.
• A minor cannot be a member or nominee or hold shares with beneficial interest.
• No minimum paid-up capital. Most OPCs start with an authorised capital of Rs. 1 lakh.
• An OPC cannot be a Section 8 (not-for-profit) company and cannot carry on non-banking financial investment activities, including investing in the securities of any body corporate.

Benefits

• No board meeting, AGM or extraordinary general meeting is needed when there is only one director. A resolution signed and dated by the member and entered in the minute book is enough, and that date counts as the date of the meeting.
• Complete control with one owner, which means fast decisions. Directors can still be appointed for administrative work without giving them any shares.
• Fewer ROC filings than a private limited company, so the owner can focus on the business.
• Limited liability: business losses and debts do not touch the personal savings or wealth of the owner.
• Benefits available to small businesses, such as lower interest rates on loans and collateral-free credit up to certain limits.
• Salary paid to the director is a deductible expense under income tax law, unlike drawings in a proprietorship. Presumptive taxation may also be available, subject to the Income Tax Act.

Relaxations for OPCs

• The annual return can be signed by the director where there is no company secretary.
• Mandatory rotation of the auditor after the maximum term does not apply.
• The financial statements can be signed by one director.
• A cash flow statement is not a required part of the financial statements.

Advantages and disadvantages

Documents you will need

• Two colour passport size photographs of each director and shareholder
• Identity proof of each director and shareholder: Aadhaar card, passport, driving licence or voter ID card
• Address proof of each director and shareholder: bank statement or passbook, electricity bill, telephone bill or any other utility bill, not older than two months
• PAN card of each director and shareholder. The name must match the income tax database.
• Proof of the registered office address: sale deed, electricity bill, property tax receipt or any other utility bill
• No objection certificate from the owner of the premises where the registered office will be located
• PAN, identity proof and address proof of the nominee, with the nominee's consent in form INC-3