Under the Companies Act 2013, a One Person Company (OPC) registration in India allows a single member who can also serve as the sole Director. This option is available to both residents and non-resident Indians, providing flexibility for individual entrepreneurs and business owners.
What is one-person company?
One Person Company in India is a new concept that has been introduced with the Company's Act 2013. A Person Company in India is incorporated by a single person. Before the enforcement of the Companies Act 2013 a single person was not able to establish a company. An OPC has the features of a Company and the benefits of a sole proprietorship. Earlier if a person had to establish a business then he or she could only opt for a sole proprietorship.
Single Ownership: OPC allows quick decision-making and efficient business management without interference or suggestions from other owners, fostering a sense of ownership and motivation for growth.
Credit Rating: OPC's credit score doesn't affect loan applications, making it more accessible for businesses with varying credit profiles.
Income Tax Benefits: OPCs enjoy income tax deductions, with a standard tax rate of 30%, surcharges based on income, and taxation as a domestic company. The director’s salary is an allowed expense.
Interest & Remuneration: Interest and remuneration are considered taxable income, with a moderate tax burden. Repaid loans to directors are taxable.
Enterprises Development Act: Newly incorporated OPCs qualify as Micro, Small, or Medium Enterprises, entitling them to receive interest rates three times the bank rate for late payments.
Easy Funding: OPCs, if private limited, can raise funds from venture capital, angel investors, and financial institutions, transitioning into private companies.
Limited Liability: OPCs offer limited liability, safeguarding personal assets and encouraging risk-taking among entrepreneurs. Ideal for innovative startups.
Tax And Process
Taxation of OPCs: OPCs are taxed at a flat rate of 30% on net profits, with surcharge and cess applied as per regulations.
No Special Tax Concessions: OPCs do not qualify for special tax concessions or exemptions.
Compliance Requirements: OPCs must comply with yearly requirements, including filing income tax returns, and financial statements with the Income Tax Department and ROC.
Other applicable taxes: OPCs must comply with payment of other applicable taxes like GST.
Yearly Director Disclosures: Directors must make annual disclosures using Form DIR-8 and MBP-1.
Other Yearly Compliance: OPCs must also adhere to various other yearly compliance obligations, such as DIR-3 KYC, MSME-1, ADT-1, DPT-3, AOC-4, and MGT-7 A.
Board Resolution/Authorization for Name/Trademark Use, Authorization for Document Execution
Registered Office Address: No-Objection Letter from Address Owner, Address Proof in Owner's Name (Electricity, Telephone, Gas, or Water Bill), If using a Shared Office, additional documents like Lease Agreement and NOC letters are needed.
Step 1: Request DSCs and DINs for each director
Step 2: Submit a request for a name reservation company incorporation
Step 3: Apply for PAN and TAN for your new business
Step 4: RoC issues an incorporation certificate with a PAN and TAN
Step 5: Open a bank account and start your business.
What is the difference between OPC, LLP, and Pvt Ltd entities?
One Person Company (OPC): Single shareholder, limited liability, no mandatory minimum directors.
Limited Liability Partnership (LLP): Multiple partners, each with limited liability for their actions and their supervised parties.
Private Limited Company (Pvt Ltd): Requires at least two shareholders and directors, provides limited liability, and allows fund-raising through issuance of shares.
Who is eligible for OPC?
Only a natural person who is an Indian citizen and resident in India can form an OPC. Additionally, an individual cannot be a member of more than one OPC at the same time.
Is OPC public or private?
OPC is a type of private company. It has all the features of a private company with the exception that it can have only one shareholder.
Can OPC have directors?
Yes, OPC can have directors, but it must have a minimum of one director at all times. The sole shareholder is also the director by default
What are the rules for OPC companies?
The owner must be an Indian citizen and resident of India. It cannot have more than one shareholder. The minimum authorized capital is not applicable. It must add "One Person Company" to its name to distinguish it from other types of companies.