How Is a One Person Company (OPC) Formed? | Corpzo

A One Person Company (OPC) is a unique business structure introduced under the Companies Act, 2013, designed to promote entrepreneurship among individuals. It allows a single person to start and manage a company with limited liability, offering the benefits of a private limited company while minimizing compliance burdens. This structure is ideal for solo entrepreneurs, consultants, and startups seeking credibility, flexibility, and legal protection.

Key Features of a One Person Company (OP

C)

• Single Owner: Only one individual can act as both the shareholder and director.
• Limited Liability: The owner’s personal assets remain protected from business liabilities.
• Separate Legal Entity: The OPC has its own legal identity, separate from its owner.
• Nominee Requirement: A nominee must be appointed who takes charge in case of the owner’s incapacity or death.

Step-by-Step Process to Form a One-Person Company in India

1. Obtain Digital Signature Certificate (DSC):
2. The promoter must acquire a DSC for signing documents electronically.
3. Get Director Identification Number (DIN):
4. Apply for a DIN through the MCA portal for the proposed director.
5. Name Approval:
6. Submit your preferred company name to the Ministry of Corporate Affairs (MCA) using the RUN (Reserve Unique Name) service.
7. Draft Legal Documents:
8. Prepare essential documents like the Memorandum of Association (MOA) and Articles of Association (AOA) defining the company's objectives and rules.
9. Filing Incorporation Form (SPICe+):
10. File the incorporation form online with all documents, nominee details, and proof of registered office.
11. Certificate of Incorporation (COI):
12. Upon approval, the MCA issues a Certificate of Incorporation, confirming legal registration of the OPC.

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At Corpzo, we simplify the entire OPC formation process, ensuring quick registration, error-free documentation, and compliance support. Whether you’re an individual entrepreneur or a small business owner, we help you register your One Person Company seamlessly and legally.

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The Companies Act, 2013, introduced the new concept of One Person Company (OPC). As the name suggests, an OPC is a company established by a single person. A single individual establishes and manages the company. An OPC has all the features of a company, such as perpetual succession, limited liability, and a separate legal entity. 

Before the enforcement of the Companies Act, 2013, a single person could not establish a company. If an individual wanted to establish their business, he/she could opt only for a sole proprietorship, as there had to be a minimum of two directors and two members to establish a company.

In a Private Company, a minimum of 2 Directors and 2 Members are required, whereas in a Public Company, a minimum of 3 Directors and a minimum of 7 Members are required. A single person could not incorporate a Company previously.

As per Section 2(62) of the Companies Act 2013, a company can be formed with just 1 Director and 1 member. The director and member can be the same person. It is a form of a company where the compliance requirements are fewer than those of a private company. Thus, a person company means one individual who may be a resident or NRI can incorporate his/her business that has the features of a company and the benefits of a sole proprietorship.

Advantages Of OPC

Legal status 

The OPC receives a separate legal entity status from the member. The separate legal entity of the OPC gives protection to the single individual who has incorporated it. The liability of the member is limited to his/her shares, and he/she is not personally liable for the loss of the company. Thus, the creditors can sue the OPC and not the member or director.

Easy to obtain funds 

Since OPC is a private company, it is easy to go for fundraising through venture capital, angel investors, incubators, etc. The Banks and the Financial Institutions prefer to grant loans to a company rather than a proprietorship firm. Thus, it becomes easy to obtain funds.

Less compliances 

The Companies Act, 2013, provides certain exemptions to the OPC with relation to compliance. The OPC need not prepare the cash flow statement. The company secretary need not sign the books of accounts and annual returns, and be signed only by the director. 

Easy incorporation 

 It is easy to incorporate OPC as only one member and one nominee is required for its incorporation. The member can also be the director. The minimum authorized capital for incorporating an OPC is Rs 1 lakh, but there is no minimum paid-up capital requirement. Thus, it is easy to incorporate compared to other forms of companies.

Easy to manage 

Since a single person can establish and run the OPC, it becomes easy to manage its affairs. It is easy to make decisions, and the decision-making process is quick. The ordinary and special resolutions can be passed by the members easily by entering them into the minute book and signing them by the sole member. Thus, running and managing the company is easy as there won’t be any conflict or delay within the company.

Perpetual succession 

The OPC has the feature of perpetual succession even when there is only one member. While incorporating the OPC, the single-member needs to appoint a nominee. Upon the member’s death, the nominee will run the company in the member’s place. 

Pre-requisites for setting up an OPC in India

One Member and Director: The OPC must have only one individual as the owner, who can also be a director.

Resident Indian: The owner of the OPC must be a natural person who is a resident in India during the previous calendar year, i.e, the person must have resided in India for a minimum of 182 days during the previous calendar year.

Nominee: The owner must nominate another individual as a nominee for the OPC. The nominee should also be a resident Indian. This nominee will take over the management of the OPC in case of the owner's death or incapacity.

Unique Name Reservation: Before registering the OPC, the owner must reserve a unique name for the company through the RUN (Reserve Unique Name) web service provided by the Ministry of Corporate Affairs (MCA). An OPC is required to include "(OPC) Private Limited" in its name as per regulatory guidelines.

One person one OPC: A single individual is permitted to register only one OPC), and similarly, a person can serve as a nominee in only one OPC.

NOW EVEN NRIs CAN REGISTER AN OPC IN INDIA

The Companies (Incorporation) Second Amendment Rules, 2021, introduced changes to simplify the OPC registration process. These changes include allowing non-resident Indians (NRIs) to incorporate OPCs in India and permitting OPCs to convert into any other type of company (except Section 8 Company) at any time, regardless of when the OPC was incorporated.

Documents required for registration of OPC

The following documents are required for the Nominee, Shareholder, and Director:

Photograph and Specimen Signature

PAN Card

Aadhar Card

ID Proof (Driving License/Passport/Voter ID)

Address Proof (Electricity Bill/Latest Bank Statement/Mobile Bill) (not older than 2 months)

The following documents are required for the proof of Registered Office Address:

Copy of the latest bank statement/telephone or mobile bill/electricity or gas bill in the name of the property owner

Copy of the Lease deed/Rent Agreement (in case of rented property)

Copy of the sale deed/property deed (in case of owned property)

Copy of the no-objection certificate from the property owner

The following documents are required for the NRI Shareholder*:

Photographs and Specimen Signature of NRI Shareholder

Passport of the NRI Shareholder

OCI Card (if any)

Notarized copy of address proof (latest Telephone, Electricity Bill, Bank Statement) of NRI Shareholder

PAN Card (if any)

Aadhar Card (if any)

Note: All documents must be self-attested and either apostilled or notarized and must be in English.

Process for registration of OPC

Here's a streamlined process for registering OPC in India:

Step 1: Name Approval: Begin by reserving a name for the company through SPICe+ Part A. Provide two preferred names along with a rationale and the objectives of the company.

Step 2: Obtaining DSC and DIN: Get a Digital Signature Certificate (DSC), mandatory for all intending Directors or Subscribers of the company. Also, ensure Directors obtain their Director Identification Number (DIN) through the SPICe+ form.

Step 3: Filing Application: Apply for SPICe+ PART B, along with SPICe+ MOA and SPICe+ AOA, for incorporation of the One Person Company with the Registrar of Companies.

Step 4: Additional Services: As of February 23, 2020, additional services can be obtained at incorporation by filing the AGILE-PRO-S linked web form, including PAN, TAN, EPFO registration, ESIC registration, Bank Account opening, and GSTIN (optional). Professional Tax and Shop and Establishment Registration are optional.

Step 5: Obtaining Certificate of Incorporation Upon successful completion of the process, obtain the “Certificate of Incorporation” from the Registrar of Companies.

Mandatory Compliance Requirements for an OPC

For One Person Companies (OPCs) in India, adhering to mandatory compliance requirements is crucial for maintaining their legal standing and operational effectiveness. These requirements encompass a range of activities, from financial statement filings to board meeting protocols:

Conducting Annual General Meeting (AGM): OPCS doesn't need to hold an AGM, but it is recommended to hold one within six months of the end of the financial year, even if there's only one director.

Filing Financial Statements: OPCs need to prepare financial statements like balance sheets, profit and loss statements, and cash flow statements. These must be filed with the Registrar of Companies (ROC) within 30 days of the AGM.

Filing Income Tax Returns: OPCs are required to file income tax returns by July 31st of each year. If the OPC's annual turnover exceeds Rs. 1 Crore, conducting a tax audit becomes compulsory.

Filing Annual Return: OPCs must submit an annual return to the Ministry of Corporate Affairs (MCA) within 60 days of the AGM.

Statutory Audit: OPCs must undergo a statutory audit of their financial statements, which should be conducted by a qualified Chartered Accountant.

Maintenance of Statutory Registers and Records: OPCs must maintain various statutory registers and records, including the register of members, register of directors, and minutes of board meetings.

Conducting Board Meetings – OPC must hold a minimum of two board meetings annually, with at least a 90-day interval between them.

Appointment of Auditor: An auditor to be appointed for five years using Form ADT-1, and ensure statutory audits of financial statements.

Disclosure of Interest: Ensure directors disclose any interest in other entities at the first board meeting or upon any change.

Director KYC: filing application for KYC of directors in form DIR-3 KYC or DIR-3 KYC Web, as the case may be, before the 30th of September every year

Eligibility Criteria for the Incorporation of a One-Person Company

Before registering a One Person Company (OPC), it is crucial to understand the eligibility criteria and constraints associated with its incorporation. The Companies Act lays down specific requirements that must be met to ensure the promoter is eligible to register an OPC.

Natural Person and Indian Citizen: Only a natural person who is an Indian citizen can incorporate an OPC. Legal entities like companies or LLPs cannot establish an OPC.

Resident in India: The promoter must be a resident in India, which means they should have resided in India for a minimum of 182 days during the previous calendar year.

Minimum Authorized Capital: The OPC must have a minimum authorized capital of Rs 1,00,000. It is the amount mentioned in the company's capital clause during registration.

Nominee Appointment: During the incorporation of the OPC, the promoter must appoint a nominee. The nominee will become a member of the OPC in the event of the promoter's death or incapacity.

Restrictions on Certain Businesses: Businesses engaged in financial activities such as banking, insurance, or investment cannot be incorporated as an OPC.

Conversion to Private Limited Company: If the OPC's paid-up share capital exceeds 50 lakhs or its average annual turnover exceeds 2 Crores, it must be converted into a private limited company. This conversion ensures compliance with the regulatory requirements for larger companies.

Documents Required

The following documents must be prepared and submitted to the Registrar of Companies (ROC):

Memorandum of Association (MoA): This document outlines the objectives of the business for which the company is being incorporated.

Articles of Association (AoA): The AoA lays down the company's by-laws.

Appointment of Nominee: Since there is only one director and member, a nominee who will act on behalf of the director must be appointed in case of incapacitation or death. The nominee's consent, along with their PAN card and Aadhaar card, should be provided through Form INC-3.

Proof of Registered Office: The proof of the registered office, proof of ownership, and a No Objection Certificate (NOC) from the owner must be submitted.

Declaration and Consent: The proposed director should provide a declaration in Form INC-9 and their consent in Form DIR-2.

Compliance Certificate: A declaration by a professional certifying that all necessary compliances have been made.

The SPICe+ form can be conveniently filed online through the Ministry of Corporate Affairs portal. By utilizing this streamlined process, the registration of an OPC can be completed efficiently and effectively. To register a One Person Company (OPC) in India, you can follow the online registration process through the MCA portal by following these steps:

Step 1: Obtain a Digital Signature Certificate (DSC)

Obtain a Digital Signature Certificate (DSC) for the proposed director and shareholder of the company. The DSC is used for electronically signing documents.

Step 2: Obtain Director Identification Number (DIN)

Obtain a Director Identification Number (DIN) for the proposed director of the company. The Ministry of Corporate Affairs (MCA) issues this unique identification number.

Step 3: Name Reservation

Apply for name reservation through the MCA portal by submitting Form SPICe+ (Part A). Choose a unique name for your company, ensuring it doesn't resemble any existing company or trademark.

Step 4: Prepare MOA and AOA

Prepare your company's Memorandum of Association (MOA) and Articles of Association (AOA). These documents outline the company's objectives and internal regulations.

Step 5: File the Forms

To file the necessary forms with the Ministry of Corporate Affairs (MCA) for OPC registration, the following documents will be attached to the relevant forms:

SPICe+ Form: This is the main form for OPC registration and includes Part A and Part B. The following documents will be attached to this form:

Memorandum of Association (MoA)

Articles of Association (AoA)

Declaration and Consent of the proposed Director (Form INC-9 and DIR-2, respectively)

Declaration by the professional certifying compliance

Proof of Registered Office (ownership proof and NOC from the owner)

Appointment of Nominee (Form INC-3 along with PAN card and Aadhaar card)

Other relevant documents, as required by the MCA

SPICe-MOA: This form contains the Memorandum of Association (MoA) outlining the company's objectives.

SPICe-AOA: This form contains the Articles of Association (AoA), which lay down the company's by-laws.

Additionally, the Digital Signature Certificate (DSC) of the Director and the professional certifying compliance will be uploaded along with the forms.

It's important to note that the Pan Number (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) will be generated automatically at the time of incorporation of the company. Separate applications for obtaining PAN numbers and TAN are not required. The forms will go through the approval process after attaching all the necessary documents and uploading them to the MCA site. Once approved, the Pan Number and TAN will be generated, and the Certificate of Incorporation will be issued, finalizing the OPC registration process.

Step 6: Certificate of Incorporation

Once the ROC approves your application and verifies the compliance requirements, it will issue a Certificate of Incorporation. This certificate signifies the successful registration of your One Person Company.

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