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What is One Person Company (OPC)

One person company as the name suggest, can be registered with single person as member. One person company is formed by a natural person who is an Indian citizen and resident in India.

The shareholder is supposed to nominate another person who will become the shareholder in case of death of the original shareholder. Such nominee shall give his consent to become nominee. Only a natural person who is an Indian citizen and resident in India can become nominee in OPC.

Note: The term resident in India means a person who has stayed in India for a period of not less than 182 days during the immediate preceding one calendar year.

 

Registration: OPC is registered as private limited company with the registrar of companies, Ministry of Corporate Affairs.

 

Compliance

  1. Compulsory Audit: OPC needs to get its accounts audited annually.
  2. MCA Filing: OPC is required to file financial statements and annual return in prescribed forms with Registrar of Companies (ROC).
  3. Income tax: As OPC is a separate legal entity, a separate income tax return need to be file.

 

Advantages

  1. Separate legal entity: It is run by individual yet OPC provides benefit of separate legal entity which is not available in sole proprietor business.
  2. Limited liability: OPC provides limited liability protection to directors and shareholder.
  3. Less Compliance: Compliance environment is quite relaxed for OPCs in comparison to other companies.
  4. Corporate form of proprietorship: OPC is a hybrid form of proprietorship and therefore provide many advantages of proprietorship.

 

Disadvantages

  1. Not more than one OPC: A person is not eligible to incorporate more than one OPC.
  2. No Minor shareholder or nominee: Minor can’t become member or nominee of the one person company or can hold share with beneficial interest.
  3. No Voluntary conversion: OPC cannot be converted voluntarily into any kind of company up to two years from the date of incorporation except:
    1. When paid up share capital is increased beyond Rs. 50 Lakhs; or
    2. Average turnover exceeds Rs. 5 Crores during the relevant period.
  4. Company not for profit: OPC can’t be incorporated or converted into section 8 company.

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