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One Person Company (OPC)

One Person Company Registration

Single Owner

An OPC is owned and operated by a single person as director, as the name implies. This individual is the company’s lone shareholder and director.

Limited Liability

One of OPC’s primary benefits is that an owner’s liability is only as much as their ownership stake in the business. This implies that if the business incurs financial obligations, the owner’s assets are safeguarded.One of the main advantages of OPC is that the liability of the owner is limited to the extent of their shareholding in the company. This means that the personal assets of the owner are protected in case of any financial liabilities of the company.

Independent Legal Entity

An OPC is a distinct legalAn OPC is a unique legal entity that exists independently of its owner. This implies that the business can sign contracts, own assets, and carry out operations under its name. entity separate from its owner. This means that the company can enter into contracts, own property, and conduct business in its own name.

Minimum & Maximum Capital

To form an OPC, there is no minimum capital requirement. Furthermore, there is no maximum capital

Nominee Director

An OPC must have a nominee director who will take over the management of the company in case the sole owner/director becomes incapacitated or passes away.

Conversion to Private Limited Company

An OPC can be converted into a Private Limited Company if its paid-up share capital exceeds a certain threshold or if the company’s average annual turnover surpasses a specified limit.

Compliance Requirements

While an OPC offers simplified compliance requirements compared to other types of companies, it still needs to adhere to certain legal obligations, such as annual filings, financial statements, and audits.

Name of
the Company

The name of an OPC should end with “Private Limited” to clearly indicate its type.

OPC
Company Registration Process

Step 1: Obtain Digital Signature Certificate (DSC)
Director Identification Number (DIN)

  1. Apply for a Digital Signature Certificate (DSC): A DSC is required for the online filing of documents. You can obtain a DSC from certified agencies.
  2. Apply for a Director Identification Number (DIN): A DIN is a unique number assigned to a director. You can apply for DIN online through the Ministry of Corporate Affairs (MCA) portal.

Step 2: Name Approval

  1. Choose a unique name for your OPC, ensuring that the first word of the name is unique and the name ends with “(OPC) Private Limited.”
  2. File for name approval using the RUN (Reserve Unique Name) service on the MCA portal. Provide up to two proposed names in order of preference.
  3. Once the name is approved, it will be reserved for 20 days.

Step 3: Prepare and File Incorporation Documents

  1. Prepare the necessary documents, including:
  2. Memorandum of Association (MOA): This document defines the company’s main and ancillary objects.
  3. Articles of Association (AOA): This document outlines the company’s rules and regulations for internal management.
  4. Declaration by the first subscriber(s) and director(s) in Form INC-9.
  5. Consent to act as a director and declaration of DIN by the director(s) in Form DIR-2.
  6. PAN Card, Aadhar Card, and passport-sized photograph of the director and nominee.
  7. Address proof for both the director and nominee (e.g., bank statement, utility bill).
  8. Ownership proof of the registered office and an NOC from the owner.
  9. Prepare the Spice Form INC-32, which includes MOA, AOA, and other required details.
  10. Submit the Spice Form INC-32 along with the required documents to the MCA for incorporation.

Step 4: Obtain Certificate of Incorporation

  1. Once the MCA processes your application and verifies the documents, you will receive a Certificate of Incorporation.

Step 5: Obtain PAN and TAN

  1. After incorporation, PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) will be automatically allotted.

Step 6: Open Bank Account and Obtain GST Registration

  1. Open a bank account for the newly incorporated OPC.
  2. Depending on your business activities, you may need to obtain GST (Goods and Services Tax) registration.
  3. Important points to remember:
  4. Only a natural person who is an Indian citizen and resident in India can form an OPC. One person can form only one OPC.
  5. The nominee’s consent to act as a nominee and a declaration of his/her willingness to become a nominee must be filed.
  6. OPCs are subject to compliance requirements like annual financial statements, filing of income tax returns, etc.
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What an OPC Can Do

Conduct Business

An OPC can engage in any lawful business activity, except those specifically restricted by law.

Conduct Business

An OPC can engage in any lawful business activity, except those specifically restricted by law.

Dividend Declaration

An OPC can declare and pay dividends (profits) to its sole shareholder.

Dividend Declaration

An OPC can declare and pay dividends (profits) to its sole shareholder.

Accept Loans

An OPC can accept loans from its directors, subject to compliance with certain provisions of the Companies Act, 2013.

Accept Loans

An OPC can accept loans from its directors, subject to compliance with certain provisions of the Companies Act, 2013.

Bank Loans

An OPC can obtain bank loans from any type of bank, provided it meets the bank's requirements.

Bank Loans

An OPC can obtain bank loans from any type of bank, provided it meets the bank's requirements.

What an OPC Cannot Do

Angel Investment and Venture Capital

There's no inherent restriction on raising funding from angel investors or venture capitalists. An OPC can indeed raise funding by issuing shares, but the total paid-up share capital of an OPC cannot exceed Rs. 50 lakh, and it cannot convert into any other type of company unless its paid-up share capital exceeds this limit or if two years have passed since its incorporation.

Angel Investment and Venture Capital

There's no inherent restriction on raising funding from angel investors or venture capitalists. An OPC can indeed raise funding by issuing shares, but the total paid-up share capital of an OPC cannot exceed Rs. 50 lakh, and it cannot convert into any other type of company unless its paid-up share capital exceeds this limit or if two years have passed since its incorporation.

Loan to Directors or Relatives

An OPC is restricted from giving loans to its directors or their relatives. This is to prevent misuse of funds and related-party transactions.

Loan to Directors or Relatives

An OPC is restricted from giving loans to its directors or their relatives. This is to prevent misuse of funds and related-party transactions.

Use as a Diversion of Funds

An OPC (or any company) should not be used to divert funds for purposes other than its business activities. This is a standard business principle to ensure proper financial management.

Use as a Diversion of Funds

An OPC (or any company) should not be used to divert funds for purposes other than its business activities. This is a standard business principle to ensure proper financial management.

Conversion into a Private Company

While there is a minimum time period for converting an OPC into a private company (2 years from incorporation), it's not accurate to say that an OPC cannot be converted before 2 years. The conversion depends on meeting the eligibility criteria mentioned in the Companies Act.

Conversion into a Private Company

While there is a minimum time period for converting an OPC into a private company (2 years from incorporation), it's not accurate to say that an OPC cannot be converted before 2 years. The conversion depends on meeting the eligibility criteria mentioned in the Companies Act.

Function Beyond MOA and AOA

This applies to all companies, not just OPCs. Companies are bound by their Memorandum of Association (MOA) and Articles of Association (AOA), which outline the company's scope of activities and operational guidelines.

Function Beyond MOA and AOA

This applies to all companies, not just OPCs. Companies are bound by their Memorandum of Association (MOA) and Articles of Association (AOA), which outline the company's scope of activities and operational guidelines.

It’s important to note that company laws and regulations might change over time, so it’s always recommended to consult with legal professionals or experts who are up-to-date with the current regulations before making any decisions regarding company formation, operations, or conversion.

Advantages of OPC Company Registration

No Minimum Capital

An OPC's limited liability is one of its main benefits. The owner's personal assets and the obligations of the business are distinct. In the event of debts or losses for the business, this safeguards the owner's personal assets.

Secure Personal Assets

One of the key advantages of an OPC is limited liability. The personal assets of the owner are separate from the company's liabilities. This provides protection to the owner's personal assets in case of business losses or debts.

Best for Single Founders

For entrepreneurs who wish to launch their own company, OPCs are perfect. It enables them to run the business entirely without the need for more directors or shareholders.

Easy Conversion to Private Company

An OPC can be readily changed into a private limited company, allowing for future development and expansion, if its annual turnover surpasses a certain threshold or if its paid-up capital exceeds the required maximum. But a new rule has been implemented, and now no turnover is required. 

Disadvantages of OPC Company Registration

Cannot Accept Deposits

OPCs are prohibited from accepting deposits from the public. This can limit their ability to raise capital, especially in cases where the owner needs to secure funding for business operations or expansion.

Maximum Turnover Limit

OPCs have a maximum turnover limit of Rs. 2 crore. If the turnover exceeds this limit for three consecutive years, the company must be converted into a private limited company.

Yearly Compliance Cost

OPCs, like other registered companies, have annual compliance requirements. This includes maintaining proper financial records, filing annual returns, conducting audits, etc. These requirements can lead to additional costs for the business owner.

Cannot Raise Funding Easily

While OPCs can raise capital through equity or convertible preference shares, they cannot raise funds from venture capitalists or angel investors. This can be a drawback for startups looking for significant external funding.

It’s important to note that the advantages and disadvantages of OPC registration can vary based on the specific goals and circumstances of the business owner. Before deciding to register an OPC, it’s advisable to consult with legal and financial experts who can provide tailored advice based on your business needs.

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