BUSINESS REGISTRATION
ONE-PERSON COMPANY
BUSINESS REGISTRATION
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ONE-PERSON COMPANY
WHAT IS A ONE-PERSON COMPANY (OPC)?
A One-Person Company is a recently introduced business structure that business professionals can adopt to run their organizations. The One-Person Company Organizational structure is a hybrid between the Proprietorship Business Model and a Private Limited Company Business Model. It retains certain flexibility and freedom enjoyed by the Proprietorship firm while at the same time offering the protection and credibility enjoyed by a Private Limited Company.
Recently the Government introduced a few relaxations in the incorporation and compliance of a One-Person Company, which had a considerable impact and attracted many business owners, both Indian residents and NRIs, to adopt this business model.
A One-Person Company has a separate legal entity status, limited liability protection, and requires only one member to form the company. However, unlike a private limited company, an OPC can have only one shareholder.
(Note: Though the number of Shareholders is limited to only one person, a One-person Company can have a maximum of up to 15 directors.)
To start an OPC in India, the individual must register the company with the Ministry of Corporate Affairs (MCA) and obtain a certificate of incorporation. The individual will also need to obtain a digital signature certificate and a director identification number, which are required for filing online documents with the MCA. OPCs are taxed at the same rate as private limited companies, and compliance requirements are similar as well.
OPC VS SPF
ONE-PERSON COMPANY VS SOLE PROPRIETORSHIP FIRM
In India, registering a One-Person company (OPC) has several benefits compared to running a sole-proprietorship firm. Some of the key benefits are:
- Limited Liability: One of the most significant advantages of an OPC is that it provides limited liability protection to the Owner. Limited Liability Protection means that the Owner’s personal assets are not at risk in case of any financial or legal liabilities of the company.
- Separate Legal Entity: OPC is a separate legal entity from its Owner, which means it has its own legal identity distinct from its Owner. This separate legal entity status builds credibility and trust with customers, suppliers, and investors.
- Perpetual Existence: OPC has perpetual existence, which means it continues to exist even if the Owner dies or leaves the company. This ensures the continuity of the business and provides stability to stakeholders.
- (Note: After the demise of the Owner, the ownership of the OPC gets transferred to the Nominee mentioned during the time of Incorporation of the OPC)
- Tax Benefits: OPCs are taxed at a lower rate compared to sole-proprietorship firms. They are eligible for several tax benefits, such as deductions for business expenses and exemptions for certain types of income.
- Greater Credibility: OPCs have greater market credibility than sole-proprietorship firms. They are seen as more professional and trustworthy, which can help to attract more customers and investors.
Overall, registering an OPC in India offers several benefits compared to running a sole-proprietorship firm, especially in terms of limited liability, access to funding, and tax benefits.
OPC VS PLC
ONE-PERSON COMPANY COMPARED VS PVT. LIMITED COMPANY.
In India, a One-Person company (OPC) has several advantages compared to a private limited company. Some of the key benefits are:
- Ease of Formation: OPC can be formed with just one director and one shareholder, whereas a private limited company requires a minimum of two directors and two shareholders. This makes the formation process of an OPC simpler and less time-consuming.
- Less Compliance: OPC has fewer compliance requirements than a private limited company. It is exempt from holding annual general meetings (AGMs) and can have a simpler financial statement compared to a private limited company.
- Lower Cost: OPC has a lower cost of formation and maintenance compared to a private limited company. The registration fee, stamp duty, and other expenses are comparatively lower for an OPC.
- Limited Liability: Like a private limited company, OPC offers limited liability protection to its Owner. This means that the personal assets of the Owner are not at risk in case of any financial or legal liabilities of the company.
- Single Ownership: OPC is owned and managed by a single person, which provides greater control and flexibility in decision-making. (Note: 100% of the Shares of the OPC can be held only by one Individual)
No Shareholder Disputes: OPC is not susceptible to shareholder disputes, which are common in private limited companies due to the presence of multiple shareholders with different interests.
Though the formation of an OPC has several advantages, it is mandatory to consider the specific needs and goals of the business before choosing the type of company structure.
REGISTERING YOUR OPC
SETTING-UP AND REGISTERING YOUR OPC
To register a One-Person Company (OPC) in India, you need to follow these steps:
Step 1: Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN)
The proposed director of the OPC needs to obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA).
Step 2: Obtain Name Approval
The OPC needs to obtain a unique name for its business. The name should not be identical or similar to an existing company name. A name availability application needs to be filed with the Registrar of Companies (ROC).
Step 3: Drafting of MOA and AOA
The Memorandum of Association (MOA) and Articles of Association (AOA) are legal documents that outline the objectives and rules of the company. They need to be prepared and signed by the director of the OPC.
Step 4: File for Incorporation
Form INC-32, Form INC-33, and Form INC-34 need to be filed with the ROC for incorporation of the OPC. These forms contain details such as the name of the OPC, its registered office address, the objects of the company, and the particulars of the director.
Step 5: Payment of Registration Fees
Once the ROC approves the incorporation application, the OPC needs to pay the registration fees and stamp duty to the MCA.
Step 6: Obtain a Certificate of Incorporation
After the payment of registration fees and stamp duty, the ROC will issue a Certificate of Incorporation, and the OPC becomes a legal entity.
Step 7: Apply for PAN and TAN
The OPC needs to apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.
Step 8: Opening a Bank Account
The OPC needs to open a bank account in its name and obtain other necessary licenses and registrations (like MSME, GST etc.) required for its business activities.
The above steps are the basic process for registering a One-Person company in India. However, it is advisable to consult a professional like Taxkey to ensure compliance with all the rules and regulations.
DOCUMENTS REQUIRED
DOCUMENTS REQUIRED FOR REGISTERING YOUR OPC
The following are the documents required for registering a One-Person Company (OPC) in India:
- Director Identification Number (DIN)Digital Signature Certificate (DSC)
- Name Availability: The OPC needs to obtain a unique name. The name should not be identical or similar to an existing company name. A name availability application needs to be filed with the Registrar of Companies (ROC).
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Address Proof: The OPC needs to provide proof of address for its registered office. This can be in the form of a utility bill, rent agreement, or sale deed.
- NOC from the Owner: If the registered office is owned by someone else, a no-objection certificate (NOC) needs to be obtained from the Owner.
- Affidavit and Consent: The director of the OPC needs to submit an affidavit and consent stating that they have not been convicted of any criminal offence and that they agree to become the director of the OPC.
- PAN Card and Aadhar Card: The director of the OPC needs to provide their PAN Card and Aadhar Card for identity proof.
- Passport Size Photographs: Two passport-size photographs of the director need to be submitted.
MANDATORY COMPLIANCES
MANDATORY COMPLIANCES OF AN OPC IN INDIA.
Running a One-Person Company (OPC) in India involves certain mandatory compliances that need to be fulfilled to comply with legal requirements. The following are the different types of compliances necessary for running a One-Person company in India:
- Annual Compliances: OPCs need to file their annual returns with the Ministry of Corporate Affairs (MCA) within the prescribed time limits. Annual returns include financial statements, profit and loss statements, balance sheets, and auditor reports. OPCs also need to hold an Annual General Meeting (AGM) every year.
- Tax Compliances: OPCs need to file their income tax returns annually and pay taxes as per the applicable tax rates. OPCs also need to deduct and deposit taxes such as TDS (Tax Deducted at Source) and collect and deposit Goods and Services Tax (GST) as applicable.
- Board Meeting Compliances: OPCs need to hold at least one board meeting every six months, and the director of the OPC must record the minutes of the meeting and file them with the ROC.
- Statutory Compliances: OPCs need to comply with various statutory requirements such as the Companies Act, 2013, and the rules and regulations set by the MCA and other regulatory bodies. Failure to comply with statutory requirements can result in penalties and legal consequences.
- Secretarial Compliances: OPCs need to maintain proper records and registers, including a register of members, directors, and loans, and file necessary forms with the ROC as per the prescribed time limits.
- Compliance with Other Laws: OPCs need to comply with various other laws, such as labour laws, environmental laws, and other industry-specific laws that apply to their business activities
These compliances are essential for the smooth functioning and success of a One-Person Company in India. It is advisable to seek professional help to ensure timely and accurate compliance with all legal requirements.
RECENT AMENDMENTS
RECENT AMENDMENTS TO THE ONE PERSON COMPANY IN THE COMPANIES ACT, 2013.
During the 1st week of February 2021, the MCA introduced a few amendments to the One Person Company, which are highly beneficial for business owners to adopt this business model. This amendment came into force on 1st March 2021.
- Authorized Capital: Previously, the Authorized Capital for starting a one-person company was capped at 50 Lakhs. This has been raised in the Amendment to INR 2 Crores.
- Ease of Conversion: Previously, after the incorporation of an OPC, if the Owner decided to convert it to a Private Limited Company, he had to wait for two years to make the conversion. This time limit has been abolished. Now an OPC can be converted into a Private Limited Company whenever the need arises.
- Turnover Cap: Before the amendment, if an OPC exceeds a total of 2 Crore in one Financial year, it should be mandatorily converted into a Private Limited Company. This cap on annual turnover has been increased to 20 Crore in the new amendment.
For NRIs: Previously, if an NRI stayed in India continuously for 182 days, he could start an OPC in India. This duration of stay has been cut short to 120 days for the NRIs.
HOW CAN TAXKEY HELP?
HOW CAN TAXKEY HELP?
Taxkey can provide valuable assistance to individuals looking to establish and run a one-person company (OPC) in India. Taxkey can help extensively during the stages of incorporation and successfully running your OPC. Some of them are,
- Incorporation and Registration: Taxkey can assist with the incorporation of your OPC by preparing the necessary documents, filing the incorporation application with the Registrar of Companies (ROC), and obtaining the required registrations such as Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), Goods and Services Tax (GST) registration, and other necessary licenses.
- Tax Planning: Taxkey can offer guidance on tax planning and minimizing tax liabilities. This includes recommending the most tax-efficient business structure, identifying tax deductions and exemptions, and advising on tax-saving investments.
- Compliance Management: Taxkey can help you in meeting compliance requirements by ensuring the timely filing of various returns and reports with the authorities. This includes helping you maintain proper books of accounts, filing income tax returns, and obtaining necessary certificates and licenses.
- Business Advisory: Taxkey can offer valuable business advisory services such as advising on the appropriate pricing strategies, managing cash flow, optimizing expenses, and improving profitability.
Whether it is incorporation, tax planning, compliance management, representation before authorities, or business advisory services, Taxkey is committed to providing customized solutions that meet your specific needs and goals.
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