All You Need to Know About the One Person Company Registration

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Starting a business of your own can be extremely exciting, but creative freedom and the joy of being your own boss comes with a bunch of challenges. It all begins with intimidating government paperwork, needed in order to register your business and make things official. In this article we take a look at how you can register a ‘One Person Company (OPC) Private Limited’ – a legal registration option introduced by the government in the revised Companies Act of 2013, with the objective of making it easier for start-ups to register their brands.

 

What exactly is the OPC?

Before this act was passed in 2013, at least two directors and shareholders were required to register a company. This meant, that if you wanted to start something by yourself, you simply didn’t have a choice but to find a partner. The OPC registration has changed this, making it possible for even a single person to register his or her business. As the name suggests, the company gets registered to one person, who is the sole shareholder and director of the company.

 

Do I qualify for the OPC registration?

If you run a business all by yourself, and have no other partners or shareholders, then you are eligible to register your organization as a One Person Company; as long as you are a permanent resident of India and an Indian citizen. So, if you are a fashion designer who wants to launch a line of clothing or a chef who wants to start a catering business, this is perhaps the best option for you.

 

Is registering an OPC worth the effort?

Upcoming entrepreneurs can greatly benefit from registering their business as a One Person Company Private Limited. Here’s how:

Get a legal stamp of recognition - Having a legally registered company increases the legitimacy of your brand. Customers, clients, suppliers and investors will find it easier to trust your work – and we all know how important that it, especially when setting up!

Separate your personal and business assets – Let’s face it, starting something of your own comes with the risk of failure; expect the best, but prepare for the worst. Under the liability protection clause, any financial loss or debt your business faces will not need to be cleared against your personal assets.

Be your own boss – Having many directors and shareholders comes with the added hassle of dealing with other’s demands, dislikes, schedules and egos. If you are the sort that likes to work alone and maintain complete control over all business decisions, then the OPC registration is ideal for you. You can add more people to the board of directors at a later date if you feel the need to do so.

Say goodbye to tiresome protocol  – An OPC is exempt from protocol that is usually enforced on other registered companies. For example: You aren’t required to have annual or general body meetings & you can sign annual returns yourself, since you are the only decision maker.

Get more bang for your buck – It is much easier for OPCs to get loans, compared to individuals or proprietary firms. Besides, there are also several tax benefits in having a registered OPC – the director’s (your own) salary, rent for the space you use, the funds you personally invest in the business and several other expenses are deducted before paying tax. So in effect you pay income tax on a much smaller amount.

Besides, the OPC registration is ideal for those who wish to test their business model, and perhaps expand later on. With an OPC you can even begin to approach angel investors or venture capitalists. Once the company grows and becomes successful, you can convert it to a multi shareholder private limited company. So to answer that question, it certainly is worth the effort.

 

How is the OPC different from other types of registrations?

Spot the differences! Here’s a handy table to help you compare the different types of registrations for your business.



One Person Company (OPC)

Limited Liability Partnership (LLP)

Sole proprietorship

Private Limited Company

Human capital needed at time of registration

Just a single director and shareholder is needed to start an OPC. At a later date up to 15 directors may be added.

A minimum of two directors are needed in order to register an LLP.  

As the name suggests a single person can register as sole proprietor of a company.

A minimum of 2 directors and 2 shareholders are needed in order to register a private limited company.

Ownership

The business is regarded as a separate entity owned by one person.

The business is regarded are a separate entity, but has several different owners.

The business and owner are viewed as a single entity in the eyes of the law.

The business is considered to be a separate entity, the affairs of which are governed by several directors.

Monetary capital needed at time of registration

A minimum capital of Rs.1,00,000 is needed to start an OPC.

No financial assets need to be declared in order to register an LLP.

No financial assets need to be declared in order to register a Sole Proprietorship.

A minimum capital of Rs.1,00,000 is needed to register a Pvt. Ltd. Company.

Compliances

No board meeting or AGMs are needed if there is a single director. If the company has 2 or more directors, bi annual meetings are mandatory.

There are no compulsory compliances.

There are no compulsory compliances.

At least 1 board meeting every quarter and 1 AGM (Annual General Meeting) every 6 months for closing of accounts are mandatory.

Liability protection

A limited liability clause protects the owner’s assets. (Owner is not liable to clear business debts against his/her personal finances.)

As the name suggests a limited liability clause which protects the owners’ assets.

Unlimited liability clause makes the owner accountable for any loss or debt suffered by the business, since they are both deemed one entity in the eyes of the law.

A limited liability clause protects the owner’s assets.



How should I go about registering an OPC?

Unlike a lot of other government paperwork, registration of an OPC is quite easy! To really make it simple to understand, we’ve broken down the process into a series of steps:

 

Step 1: Apply for a Director Identification Number (DIN), and a Digital Signature Certificate (DSC).

Step 2: Register the name of your company.

Step 3: Select a nominee (who will become the owner of the company in case of your passing) & fill a nominee consent form.

Step 4: File all the above papers, and submit them to the Ministry of Corporate Affairs.

Step 5: Wait to receive your Final Incorporation Certificate and begin work at a One Person Company.

 

All the above forms and instructions are available online at www.mca.gov.in.

 

This recently introduced legal registration option indicates that the government recognizes a surge in entrepreneurship and is willing to support new business ideas! So dare to dream, and give your ideas wings by starting a One Person Company.

This post was originally written by Salonee Gadgil for Zepo: The eCommerce Blog for Small Businesses We are an eCommerce Platform and we help small businesses to sell online.
More than 1500 brands are now using Zepo.in to power their Online Stores.

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Thanks for sharing

thank you very much 

Hi Simon, 
Glad that you found this useful. Do share it along :)

Hello Saptarshi,

This is really useful, direct insight. Till now I was of opinion proprietorship is the only way to go one man show with unlimited liability. OPC sounds great.

One question : If one is running a proprietorship firm, can it be converted to OPC or is it more practical to start a new company?

Regards,

Kunal

Hi Kunal,

Basically the documents and formality requirements for OPC and Proprietorship are different. So the conversion which you want to make will essentially require you to make all new set of documentations you know.

We would suggest you take legal counsel in this regard for the exact details. 
Also let me suggest this website for further reading.

Regards,
Saptarshi.



Thanks for your reply. The website is quite useful.

http://www.onepersoncompany.in/faqs.html

Useful information !!!

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