Expert Tips for Successful OPC Registration - 24efiling

The Companies Act of 2013 provides and guarantees the formation of One Person Company (OPC) in India. It deals with the registration and functioning of One Person Company in India. While comparing OPC with the private company, here at least a minimum of 2 single members and 2 directors are required. However, in OPC is quite enough to register and form a company with one member and one director. This is the significant difference between OPC and others. Section 2(62) of the Company’s Act 2013, provides the official registration of one Person Company and it is completely legal. In India, One one-person company Registration requires one single member who represents and manages the whole firm along with a single director. This type of company requires fewer requirements compared to the private company. The One Person Company emerged with the objective of developing a sole proprietorship firm. It is one of the types of private limited companies. Any individual can register and form One Person Company, but to start operating the registration is mandatory.

TABLE OF CONTENTS • • •

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WHAT IS THE PROCESS OF OPC Registration?

WHO ARE ELIGIBLE FOR OPC REGISTRATION? WHAT ARE THE BENEFITS FOR REGISTERING ONE PERSON COMPANY? • WHAT IS THE TOTAL COST OF REGISTERING OPC IN INDIA? TAXATION OF OPC • DISADVANTAGES OF OPC • FAQ’s

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CONCLUSION

WHAT IS THE PROCESS OF OPC REGISTRATION? Now, it is well clear to us what is OPC and who is eligible.?

Here are certain conditions that must be fulfilled in order to be eligible for the registration of OPC. If in case, the subscriber is dead, the nominee of that subscriber enters and works as a single member of the company.

Here is the step-by-step registration process for OPC (One Person Company) Step 1 – Firstly, one should apply for the DSC (Digital Signature Certificate) of the proposed director.

Step 2 – Secondly, the Member of the OPC must apply for the DIN (Director Identification Number) of the proposed director.

Step 3 – Next, it should be opted for name approval. The Members of OPC should apply for the name reservation in MCA (Ministry of Corporate Affairs). They should apply with one name on the SPICe+ (INC-32) application form.

Step 4 - At this stage, the member of OPC, after completing the above steps he/she has to accumulate or submit all the essential documents and should attach all these documents to the SPICe Form, SPICe-AOA, SPICeMOA and upload them to the MCA site for approval.

Download SPICe-AoA Step 5 - After completing the verification of the documents that are submitted, the ROC (Registers of Company) will provide or issue an Incorporation Certificate which will enable the member of OPC to initiate and run the company.

WHO ARE ELIGIBLE FOR OPC REGISTRATION? • • •

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A natural person who is a resident of India can form OPC. Unlike the other type of company, only one member can form an OPC. The name that has been created should be unique and it should not be similar to any other company and trademark which is already in existence.

An individual cannot have and operate more than one OPC. There must be at least one director in the OPC along with the member.

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WHAT ARE THE BENEFITS FOR REGISTERING ONE PERSON COMPANY? As it is well known, OPC can be formed with one Director and a member. It provides great benefits for registering and entering into a one-person company. Here are the benefits of registering a one-person company.

1. Easy Incorporation In a One Person Company, a single person can start a business with very few requirements. The incorporation of the OPC requires only one member and one director. The paid-up capital is not required for its incorporation. so, by this, it’s very clear that the One Person Company is easy to incorporate.

2. Complete Control by the Individual

As it is a single-person company, complete control is vested in the hands of a single person. In which the decision-making becomes easy and quick as there will be no different and conflicting opinions, the running, functioning and management of the Company will be quite easy.

3. Easy Compliance and Tax Flexibility The Companies Act 2013 provides lesser compliance to One Person Company. Less compliance means less paperwork, which results in the usage of less time to carry out such lesser compliance. The OPC has no need to show the cash flow and avails the benefit of tax availability too.

The Director has to maintain the accounts book and submit the annual returns.

4. Benefits for Small-Scale Industries One Person Company avails the benefits that are provided to small-scale industries for example easy funding, less compliance, loans at a lower interest rate, etc It is a great beneficial thing to the OPC to run the company.

5. Ease in Funding One of the significant benefits is that OPC can take its funds through various opportunities like capital ventures, financial institutions and other investors. The fund is necessary to operate and improve the business of the company. In order to bring up its funds from outside, the OPC can change or upgrade itself into a private company.

6. Least requirements for Registration When it comes to the one-person company, the process of registration is simple and the requirements which are needed are very less when it is compared with the registration of other types of companies.

7. Greater Credibility It is well known that the OPC consists of a single member and single director, the member controls the whole firm, resulting in its accounts being audited and maintained annually, and thus ultimately it has greater credibility.

8. Significant Growth In the introduction, we saw that the One Person Company is based on the sole ownership of the Company and it is a Centralised Management System which pushes the Company towards achieving significant growth and a great contribution to our country’s economy.

9. Income Tax Benefits In order to avail the benefits from income tax which is at least for 5 years, must register in the start-up India scheme of the government. For that, the one-person company must be unique when compared to others and should provide a greater level of employment.

10. Sole Business Ownership The one-person company is handled by one member and one director.

Sole ownership provides stability in the business as there will be no chance of conflict of interest or opinions among the shareholder group because only one member is running the whole business in a one-person company.

11. Increased Transparency

Another significant benefit of the One Person Company is increased transparency while dealing and managing with government authorities.

The transparency can be seen both in the Government and the applicant.

12. Beneficial to sectors like MSME and SME The one-person company is quite beneficial to the sectors like MSME AND SME. The MSME sector stands for the Ministry of Micro and SME stands for Small and Medium Enterprises. The business in rural areas can be enhanced through the services of OPC. The one-person company can bring a good reputation and growth to the MSME and SME sectors.

Also read related articles Is GST Mandatory for OPC?

WHAT IS THE TOTAL COST OF REGISTERING OPC IN INDIA? The nominal share capital determines the government fees that are required to register the OPC in India. For instance, if the Share Capital of the OPC is 10, 00,000, then the Government fees for registering an OPC would be 2,000/- Rs. If the nominal share capital is between Rs. 10, 00,000.00 to Rs. 50, 00,000. – Rs. 2,000. Rs. 200 will be added to each Rs. 10,000 shares. However, there are also some additional fees that would apply for the OPC incorporation in India for example stamp duties, form filing fees and DIN form fees.

TAXATION OF OPC As it is well known that one person company is carried out by one person.

It’s quite similar to a private Limited company. OPC is not recognized and not discussed in the Income Tax Act 1961. When it comes to compliance with tax One person company is similar to a Private Limited Company.

Hence like private limited companies, OPC also needs to file income tax returns. The OPC has to file the ITR even if there is no profit or transaction.

The Income Tax Rate for One Person company is 25%.

DISADVANTAGES OF OPC 1. Suitable for only small businesses: OPC is suitable only for small business structures. It is very clear that OPC can have one member and one director, so it cannot be expanded by adding more shareholders or members. This is one of the major drawbacks.

2. Restriction of Business Activities Another drawback is that the OPC cannot take up with Non-Banking Financial Investment activities, and it cannot be converted to a company that deals with charitable objects as mentioned under Section 8 of the Companies Act, 2013.

3. Ownership and Management Sometimes there can be misuse of power which can lead to unethical business practices because in One Person Company, there is only one director and member, and all the decisions are made by a single person, if the decision-making powers.

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1. WHAT IS AN OPC UNDER THE COMPANIES ACT 2013?

An OPC is a specific kind of corporate entity that enables a lone person to run and control the firm. It was first created in India to give business owners a platform to launch a company with the advantages of limited liability.

2. WHO IS ELIGIBLE TO BE A MEMBER OF AN OPC? To serve as a member and nominee of an OPC, a natural person must be an Indian citizen and resident of India. For the aforementioned purposes, a person is considered to be a “resident of India” if they have spent at least 102 days there in the financial year that just ended.

3. CAN A PERSON BE A MEMBER OF MORE THAN ONE OPC? No, a person can be a member of only one OPC. He or she cannot be a member of more than one OPC as mentioned under the Companies Act 2013.

4. IS THERE ANY TAX ADVANTAGE TO FORMING AN OPC? An OPC does not have a unique tax benefit over any other type of company. The tax rate is a flat 30%; however, all other tax laws, including MAT and Dividend Distribution Tax (DDT), are still in effect.

5. IS THERE ANY THRESHOLD LIMITS FOR AN OPC TO MANDATORILY GET CONVERTED INTO EITHER A PRIVATE OR PUBLIC COMPANY? No, the Companies (Incorporation) Second Amendment Rules, 2021 eliminated the requirement for OPC conversion upon exceeding the minimum paid-up capital and average annual turnover. Because of this, an OPC does not now have to change its status to a private or public company when its paid-up capital and average annual revenue increase.

6. WHAT IS THE MANDATORY COMPLIANCE THAT AN OPC NEEDS TO OBSERVE? The minimum requirements include holding at least one board meeting in each half of the year and requiring a minimum of 90 days to pass between meetings.

Keeping accurate books of accounts.

Audit of financial statements as required by law.

Submitting business Income Tax Returns by September 30th each year.

Financial Statements on Form AOC-4 and ROC Annual Return on Form MGT 7 have to be submitted.

7. WHO CANNOT FORM AN OPC? No one under the age of 18, a resident of another country, a non-resident, or someone who is physically or mentally disabled under a contract may join.

8. HOW TO CONVERT AN OPC TO A PRIVATE LIMITED COMPANY? The minimal number of members and directors for an OPC can be raised to two before a special resolution is passed to convert it voluntarily into a

private limited company. To convert OPC into a private limited company, creditors must provide a No Objection Certificate (NOC) in writing.

9. WHAT IS THE DIFFERENCE BETWEEN AN OPC AND A SOLE PROPRIETORSHIP? One Person Company (OPC): It has a single shareholder, limited liability, and no minimum requirement for the number of directors that must be appointed.

Private Limited Company (Pvt Ltd): It offers limited liability and the capacity to raise money through the issuance of shares, but it also requires a minimum of two shareholders and two directors.

10. HOW MANY DIRECTORS CAN AN OPC HAVE? OPC can have directors, but there must always be at least one of them. By default, the only shareholder also serves as the director.

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CONCLUSION Hence, the one-person company is operated by one member and one director. The OPC registration covers the member with limited liability protection therefore, if in case of any loss of the company, the member will not be liable for it. The incorporation process in OPC is quite easy. Earlier, it was like starting a company there must be more than one person either in a private company or public company but this has changed after the enforcement of the Company Act 2013.