The enactment of the Companies Act, 2013 brought some very good and revolutionary changes in the system. It laid down the very necessary rules and regulations for the merging companies and gave them the power and the freedom to do their businesses in a suitable manner.
Among the various reforms of the company act, 2013, one very important was the incorporation of One Person Companies. Before the enactment of this act, if an entrepreneur wished to start a business solely in his name, it was not possible. He or she had to go for a sole proprietorship form of company. This act laid the foundation of single-owner companies where only an owner and a director were required to run the business.
One-person companies are blissful for people who wish to start their business with only one person and don't want many people to get involved. This freedom has given rise to many budding entrepreneurs and has given them the courage to stand up for themselves.
One-person companies have a separate identity and thus provide safety to the shareholder or the founder. The founder is only liable for up to his contribution in the shares of the company and is not bound to pay for any losses.Great investment opportunities
One-person companies seem great investment opportunities to angel investors, financial institutions, banks, etc. People are ready to invest in these companies rather than investing in bigger companies or proprietorship firms. Also, these companies can raise funds through venture capital, allotting shares.Easy to form
One-person companies, as the name suggests, are easier to form as they need only one person as the member(can be the director too) and one nominee. Also, the required minimum capital investment is Rs 1 lakh.Lesser Compliances means more freedom
As One-Person companies are single-member firms, they don't need to generate the cash for statements or get the accounts signed by the company secretary. The director can solely manage the accounts single-handedly and also, there is no need to hold general annual meetings.Quicker resolutions
One-Person Companies come with the biggest benefit that they are easily manageable. The day-to-day decisions for any conflicts or issues arising can be solved quickly and more effectively as there is no hierarchy of professionals involved and every decision is centered around the director’s role.The policy of perpetual succession
One-person companies too can follow the policy of perpetual succession and are not liable to be dissolved in events of bankruptcy or death of the owner. In such cases, the Nominee takes the place of the director and runs the business accordingly.
Limited Liability companies provide more protection to the partners and there is no liability on them. These firms make the partners immune from facing any personal liability in cases of debts, misconduct, or any wrongful acts, and the owners are held liable only up to their investments.
To register One Person Company, the applicant must furnish the following set of documents:-
There are two ways in which an OPC can be registered-
By visiting the official government website
The procedure of registration on the government portal can be quite lengthy and cumbersome. Filing Lounge has a distinctive section for different types of registration. Hence, You can opt for Registration of One Person Company with us. Here are the steps to be followed:-
Apply for One Person Company Registration
If the paid-up capital exceeds Rs. 50 lakhs and the annual turnover of One person company exceeds Rs. 2 crores, the company needs to be converted into a Private Limited Company. Thus, for large businesses, a One-Person company is not a suitable option.Tax Rates
One-person companies have to pay larger tax and they cannot avail the tax slab advantage which is in turn availed by other kinds of firms. OPCs have to pay 30 % income tax and this may seem quite unprofitable to many.Higher Compliances
One-person companies have to go through higher cost compliances as compared to partnership firms or similar firms.The Suffix OPC
One-Person companies have to add the suffix One Person Company with their names and this might leave an impression that the company is solely run by a single person. This may create a feeling of distrust in the company and the owner.One OPC At A Time
If the owner wishes to form another OPC, he or she cannot do so because he or she already has an OPC in his or her name. So, at a time, only one OPC can be incorporated in the same person’s name.Decisions Are Completely Dependent On Owner
In One-Person companies, the entire decision-making and implementation process rests in the hands of the single owner and there is no guidance from any side. In cases where the owner lacks decision-making capabilities, the company may suffer huge losses.Better To Form A PVT. LTD. If Expecting High Turnovers
If the OPC is functioning properly and expecting good turnovers, then the company should be formed into a Private Limited Firm, by the Companies Act, 2013. After the incorporation of OPC, it cannot be converted into a private limited company before two years.
An OPC can be converted into a private Limited Company on the given conditions-
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Only an Indian citizen who is a resident(has stayed in India for a period of 182 days) of India can become a member as well as the nominee of an OPC.
Yes, the nominee’s consent form can be withdrawn or his or her name can be changed by filing the form INC-4.
If the annual paid-up capital of the company exceeds Rs. 50 lakhs and if the annual turnover exceeds Rs. 2 crores, the OPC should be converted into a private or public limited company by filling up Form INC-6.
No, as per the company act, 2013, a foreign national cannot set up an OPC in India.
No, a nominee only needs to have a PAN card in his or her name.
In cases of change of membership accounting to the sudden demise of the owner or the incapacity to manage, the Form INC-4 needs to be filled with the details of the new member.
The time limit for filing the Form is within 30 days in case of voluntary conversion and within six months of mandatory conversion.