Before the Companies Act of 2013 came into force, starting a company alone by an individual wasn’t an option. People had to go for sole proprietorship because setting up a company needed at least two directors and members. For a Private Company, you needed 2 Directors and 2 Members, and for a Public Company, it was 3 Directors and 7 Members. So, if you were alone, you couldn’t start a Company.
But when the Companies Act 2013 came into force, it introduced something new: One Person Company (OPC). An OPC is simply a company started and managed by one person. It gets the benefits of being a company, like staying in business forever, having limited liability, and being its own legal person. Now, with just 1 Director and 1 member (who can be the same person), an individual can form a company. This way is easier in terms of following rules compared to a private company. So basically, an OPC allows a single individual, whether residing in India or abroad, to start a business that combines the benefits of a company with the simplicity of a sole proprietorship.
Eligibility Criteria for Registering a One Person Company (OPC):
Before registering a One-Person company (OPC), it’s important to understand the eligibility criteria and limitations set by the Companies Act. Here are the key requirements:
- Natural Person and Indian Citizen: Only a natural person who is an Indian citizen (whether resident in India or otherwise) can establish an OPC in India. Companies or LLPs cannot create an OPC.
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- Resident in India: The promoter must be a resident of India, meaning they should have lived in India for at least 120 days in the previous calendar year.
- Minimum Authorized Capital: There is no minimum authorized and paid-up capital requirement.
Note: Additionally, an individual can establish only one OPC, and an OPC cannot have a minor as a member.
- Nominee Appointment: The promoter must appoint a nominee when incorporating the OPC. This nominee will become a member of the OPC if the promoter dies or becomes incapacitated.
- Restrictions on Certain Businesses: OPCs cannot be involved in financial activities such as banking, insurance, or investments.
An OPC is a company started and managed by a single person. It enjoys the benefits of a company, such as perpetual existence, limited liability, and a separate legal identity. With just one director and one member (who can be the same person), an individual can form a company. This approach is simpler in terms of compliance compared to a private company. Following are the benefits/advantages of OPC.
- Â Limited Liability: One of the main advantages of registering an OPC is the limited liability protection it offers. This ensures that the owner’s personal assets are protected in case of business losses or legal issues.
- Â Single Ownership: An OPC is owned and managed by a single individual, giving complete autonomy and control over business decisions without needing external partners or shareholders.
- Â Separate Legal Entity: Like a private limited company an OPC becomes a separate legal entity distinct from its owner after registration. This separation makes it easier to access funding, enter contracts, and seize business opportunities.
- Perpetual Existence: OPCs also enjoy perpetual succession, meaning that the death or incapacitation of the owner does not affect the continuity of the company. In such cases, the nominee becomes the member of the company. This feature ensures stability and longevity for the business.
- Minimal Compliance Requirements: Compared to other business structures, OPCs have relatively fewer compliance obligations, making them ideal for small-scale entrepreneurs who prefer simplicity and flexibility.
- Single Point of Failure: The reliance on a single individual for management and decision-making can be risky if that person becomes unavailable or incapable.
- Restriction on Business Activities: OPCs cannot engage in certain financial activities, such as banking and insurance, and it cannot be converted to a company with charitable objects mentioned under Section 8 of the Companies Act, 2013.
- Limited Growth Potential: An OPC can have only one member, limiting its ability to raise capital and expand.
Decide a Unique Name for your OPC:
Choosing a unique name for your One Person Company (OPC) is a crucial step in defining your brand identity. You can also read the following naming guidelines for more information.
- Names which resemble too closely the name of an existing company – Rule-8;
- Undesirable names – Rule 8A;
- Word or expressions which can be used only after obtaining previous approval of the Central Government.- Rule 8B;
Please note that your proposed name should not fall under the above categories. This step is important because it helps ensure your name is available for registration. Once you’ve picked your company name, you can apply for name approval through the SPICe+ Part-A RUN (Reserve Unique Name) service on the MCA portal.
Legal Terminus offers comprehensive name search services to help you find the perfect name for your company.
To complete the incorporation process for your One Person Company (OPC), file the application along with the necessary documents, including Form SPICe Part-B (Simplified Proforma for Incorporating Company Electronically), SPICe-MoA, SPICe-AoA, SPICe-INC-9, and AGILE-PRO-S. Ensure to include the requisite fees. Submit these documents electronically, along with the requisite fees, through the MCA portal for verification and approval.
Setting up a One Person Company (OPC) comes with many benefits, like limited liability, being your own boss, and having a separate legal identity. Though there are some rules to follow and paperwork to handle, getting registered is not too complicated. By going through the registration process step by step and making sure you follow the law, you can start your business on the right foot. With hard work and a drive for success, OPCs can do really well and add value to India’s business scene. Remember to seek professional guidance if needed and comply with all legal requirements to ensure a seamless registration process. With determination and perseverance, you can turn your business idea into a reality and contribute to the vibrant entrepreneurial ecosystem of India.
Would you like to register a One Person Company (OPC)? Hurry up! Legal Terminus can provide valuable assistance in smoothly and efficiently handling the registration process. Our experts ensure a hassle-free and timely transition, helping you fulfill your legal and regulatory obligations effectively. Reach out to us now to take advantage of our expert services and free consultation.
This document is intended for informational purposes and provides a general overview of the step-by-step procedures for company registration in India as per the Companies Act, 2013. It should not be construed as legal advice. Entities and individuals must consult legal experts to ensure compliance with the specific legal requirements and interpretations of the Act.
Prepared by
Mr. Smruti Ranjan Sahoo
(B. Com., LL.B)
