One Person Company
A One Person Company or an OPC is a mixture of a Sole Proprietorship and a Pvt. Ltd. Co. taking the advantages of both. The ease of a Sole Proprietorship and benefit of limited liability of the Pvt. Ltd. Co. In short, an OPC is a Sole Proprietorship with Limited liability. It is a boon for single entrepreneurs who wish to run a business with limited liability and do not wish to or do not require to add another person to the business for the sake of availing limited liability as is the case with a LLP or Pvt. Ltd. Co. An OPC requires atleast one member to be created who shall be the Member/Director/Shareholder of the OPC. Further such person must nominate another person as nominee who shall take his place in case of death, insolvency or lunacy of the existing Member/Director/Shareholder. In case the paid up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees, then the OPC has to mandatorily convert into Pvt. Ltd. Co. or Public Ltd. Co.
FAQ
1. Who can be a Member/Director/Shareholder of an OPC?
2. Who can be a nominee of an OPC ?
The requirement to be a nominee of an OPC is the same as that of being a Member/Director/Shareholder.
3. Can a person be a Member/Director/Shareholder of more then one OPC?
No. A person can be a Member/Director/Shareholder in only one OPC at a time. If a person who is a Member/Director/Shareholder in one OPC and a nominee in another OPC becomes a Member/Director/Shareholder due to such nomination on death, insolvency or lunacy of the person who had nominated him in that OPC, he shall have to decide within a period of 180 days in which OPC he would wish to remain as Member/Director/Shareholder and relinquish the other OPC.
4. Is there a minimum requirement of capital needed to start an OPC?
No. There is no minimum requirement of capital that a person has to bring in to initiate an OPC.
5. What is authorized capital?
Authorized capital, as mentioned above, is the amount of shares that a Company may issue to its share holders. Although there is no minimum requirement of authorized capital to start an OPC, the applicant is supposed to pay Government fess of a minimum of Rs. 1 Lac as his share capital even though his authorized share capital is below Rs. 1 Lac.
Advantages Of OPC
Single owner
Since only person is required to start an OPC, there are no issues in ownership of the business at any point of time. It is essentially a Sole Proprietorship with limited liability which is monitored by the Registrar of Companies.
No minimum capital requirement
There is no requirement of minimum capital to start an OPC. However, the applicant is required to pay the Government fees of Rs. 1 Lac as authorized capital. This does not mean that you need to have a minimum of Rs. 1 lac as your authorized capital.
Ease of use and minimum compliances
Since there is only one Member/Director/Shareholder, annual or general meetings, maintaining of minutes of such meetings etc. is not required. All that is required is to submit the audited accounts of the OPC to the Registrar of Companies on a timely basis.
Separate entity
Unlike a Sole proprietorship, an OPC is a separate legal entity which is run by the Member/Director/Shareholder.
Limited Liability
The Liability of the Director is limited to the extent of his shareholding just like in Pvt. Ltd. Co.
Tax benefits
Since an OPC is a separate legal person, it can make valid contracts with its Member/Director/Shareholder and pay remuneration to its working Director, rent if it uses the premises of the Member/Director/Shareholder, interest on money brought in by Member/Director/Shareholder as loan etc. All such payments are allowable expenses and help in bringing down the profits of the OPC on books thereby helping a lot in tax planning and saving.
Nominee easily becomes new Member/Director/Shareholder
In case of death, insolvency or lunacy of the existing Member/Director/Shareholder, the nominee easily becomes the new Member/Director/Shareholder with minimum paperwork and loss of time and the business as well as the company continues under new ownership.
Can buy and sell property
An OPC, being a separate legal person, can buy and sell property in its own name.