One Person Company (OPC) – All You Need To Know

A One Person Company (OPC) allows solo entrepreneurs to enjoy limited liability and a distinct legal identity. This blog covers the process of forming an OPC, its features, and benefits. Understand how this business structure can safeguard personal assets and operations for small-scale businesses.

A One Person Company (OPC) is a business structure designed for solo entrepreneurs. It allows an individual to operate a business as a separate legal entity while enjoying the benefits of limited liability. The Companies Act, 2013, allows individuals to start a company with private limited benefits and no need for partners.

For example, imagine you run a stationery shop in your local market. You’ve been managing it on your own for several years, and now you want to grow your business, take on bigger orders, and build credibility with larger clients. However, you’re not ready to bring in business partners or investors just yet. The solution? You can register a One Person Company (OPC). This will allow you to expand your business, keep full control, and protect your personal assets.

In this blog, we’ll explain what an OPC is, its features, benefits, and how it differs from other business structures. Whether you’re a local shopkeeper, freelancer, or small-scale entrepreneur, an OPC can simplify your operations and safeguard your personal finances.

What is a One Person Company (OPC)?

Under the Companies Act of 2013, a One Person Company (OPC) allows an individual to form a corporate entity with a separate legal identity, ensuring personal liability protection. OPCs are formed generally for small businesses and provide limited liability protection, which secures the individual’s personal assets while allowing organised productivity.

Definition of OPC

As per Section 2(62) of the Companies Act, a one-person company is defined as an entity with a single individual as its shareholder. Furthermore, members of a company are nothing but subscribers to its memorandum of association, or its shareholders. So, an OPC is effectively a company that has only one shareholder as its member.

Characteristics of OPC 

Here are some notable features of a One Person Company (OPC):

• Separate Legal entity: An OPC is considered a separate entity from its members, protecting them from personal liabilities.
• Limited Liability: Members are liable toward creditors only up to the amount of shareholding, which implies that creditors can hold responsible only OPC.
• Easy Fundraising: OPC can enjoy the advantages of a private company, making it easier to raise funds through venture capitalists, angel investors, and incubators.
• Less Compliance with Requirements: There are specific obligations with which OPCs are not concerned, like preparing cash flow statements or requiring a company secretary’s signature on a few documents.
• One director: An OPC is entirely owned by one person, and the profits, as well as assets, are exclusively owned by the owner.
• Mandatory Naming: The inclusion of the phrase “One Person Company” in brackets in the name of the company is mandatory for regulatory compliance.
• No AGM Requirement: OPCs are not required to hold annual general meetings.
• Prohibition on Transfer of Shares: Share transfer is limited to the nominated nominee or legitimate member.
• Eligibility Criteria: Only Indian citizens who reside in India can form or hold membership in an OPC.

One Person Company Examples in India 

Here are some examples of One Person Companies (OPCs) in India:

• Flipkart: Initially being an online bookstore started by Sachin and Binny Bansal in 2007, Flipkart has grown into India’s largest e-commerce company.
• Arkan Diary (OPC) Private Limited: A notable example of an OPC.
• Truffle House (OPC) Private Limited: Another example of an OPC.
• Broombikes OPC Private Limited: Created by Aashish Sharma in 2015.
• Snehsanskriti OPC Private Limited: Service Started in 2014 and was founded by Parveen Choudhary.
• Wowwash (OPC) Private Limited: Founded by Madhavi Narulla in 2016.
• Wimoku Private Limited (OPC): By Jothish Kumar Narayanan (established in 2014).
• Fashtoons Apparel OPC Private Limited: Launched in 2015 by Pritam Maratha.
• MyCFO India: Established by Deepak Narayanan in 2007 and later transformed into an OPC in 2013.
• Forthright Group: Employer is Vipul Shah, the company was established in the year 2011 at the start was an alpine of OPC.
• Doshi Outsourcing: Founded in the year 2007 by: Mitul Doshi Proposed to convert the Company into One Person Company w.e.f. 2013.

An OPC is a newly recognised form of a private company that is owned by a single person with at least one director. This means that the member is not accountable to the company liabilities be it in OPC since the OPC is an independent legal structure.

Membership in One Person Companies

Only individuals who are natural persons, Indian citizens, and residents are permitted to establish a one-person company.

The following are essential facts that one needs to know about OPC membership:

• An OPC can be run and managed by a single individual throughout its existence.
• The member must be a natural person, need to be an Indian citizen, and must be a resident in India.
•  The member must appoint a nominee who will inherit the ownership in case he dies or becomes incapable of managing the company.
• No person can be a member of more than one OPC at the same time .

Eligibility for Membership

Qualify for membership or eligibility of a person to an organisation typically requires having one or more of the following:

• In earlier times, membership required citizenship as well as residency in any one nation.
• Minimum age eligibility is generally dependent on the organization and its purposes.
• A member has to be mentally fit to perform his duties and responsibilities.
• Some organisations disqualify certain positions that have part-time financial benefits within the government.
• The common rule of application would be that it should be a valid application and registration.
• Some entities like professionally affiliated organizations would have the requirement of qualification which includes degrees or work experience.

Role of Nominee in Membership

A nominee is an individual nominated by an original member to attain the benefits and rights of that membership upon death of the original member. The nominee does not automatically become a new member but will act as a temporary in-between the membership until the legal heirs are decided who can take on rights.

Key Points about a Nominee in Membership:

• Purpose: To provide smooth and straightforward transfer of rights and benefits to some designated person upon death of the original member without causing delay or complications.
• Not an Owner: Such a nominee is not the owner of the membership rights; he or she will merely act temporarily pending identification of the legal heirs who will take the ownership.
• Responsibilities: Nominee’s responsibilities would include notifying the organization regarding the demise of the member, submission of proof of status as nominee, and the facilitation of transfer of membership rights to live rightful heirs.
• Designation: Generally, a member will name a close family member or someone trusted as nominee while applying for membership.

Formation of One Person Companies

An OPC allows a single individual to own and manage a company with limited liability. The process involves obtaining a DSC, reserving the company name, submitting MoA and AoA, and appointing a nominee for succession.

Here are the things to consider for establishing an OPC:

1. A member : Only a single, natural person can be a member of an OPC.
2. Nomination requirement: A member must nominate any other person who will manage the company in case the member dies or is unable to act.

Steps to Form an OPC

Starting a One Person Company (OPC) in India offers entrepreneurs the advantage of maintaining complete control over their business while benefiting from a limited liability structure. Here’s a simplified breakdown of the steps involved in forming an OPC:

Step 1: Obtain Digital Signature Certificate (DSC)

First, he has to get a DSC for the sole director, since all documents will be filed online through the MCA portal and must carry a digital signature.

Step 2: Apply for Director Identification Number

The director must get a DIN, which is a number given by MCA to every individual company directors.

Step 3: Get Name Approval

To apply for the name of the company, use MCA’s RUN service, ensuring that the name is unique and does not resemble other names or trademarks.

Step 4: Prepare MOA and AOA

Prepare the Memorandum of Association (MOA), which lays down the objectives of the company and the Articles of Association (AOA), which prescribe the company’s regulating powers.

Step 5: File Incorporation Documents

File SPICe+ with relevant documents like DSC, DIN, nominee consent, and proof of registered office.

Step 6: Apply for PAN and TAN

Apply for the company’s PAN and TAN using the SPICe+ form, streamlining the process for tax registration.

Step 7: Receive Certificate of Incorporation

The Certificate of Incorporation will be received in due course after scrutiny by the Registrar of Companies (RoC) on the application.

Step 8: Bank Account Opening

With the Certificate of Incorporation, PAN, and TAN, a bank account should be opened to start the business.

Step 9: Appoint Auditor

During the first 30 days, appoint a statutory auditor to review and report on the company’s accounts.

Step 10: Commence Business Operations

An OPC does not require a Commencement of Business Certificate, but all other legal compliances should be ensured for your type of business activity.

By following these steps, you can set up an OPC in India, allowing you to operate with limited liability and compliance obligations.

Documents Required for OPC Registration

To register a One Person Company (OPC) in India, the following documents are required:

• Identification Proof: PAN card and passports.
• Address proof: A utility bill within three months; voter ID; driving license; and any other address documents.
• Passport size photograph: Of the director or shareholder.
• Nominee Information: Written consent and details of the nominee who would take over in case the director is incapacitated or dies.
• Memorandum Document of Association (MoA): Document regarding the company’s objectives and its business.
• Articles of Association (AoA): Document that entails the rules and internal procedures of the company.
• Declaration and Consent: INC-9 (for declaration by director) and DIR-2 (for consent to act as a director).
• Registered Office Proof: Ownership proof of registered office of the company with No Objection Certificate (NOC) if the property is rented.
• Digital Signature Certificate (DSC): To sign in electronic forms.
• Director Identification Number (DIN): A unique identification number issued for the director.

Time Required for OPC Registration

The normal time to register an one person company in India is close to 7-10 working days subject to the verification of documents and Ministry of Corporate Affairs approval. 

Important parameters pertaining to one person company registration time include:

• Obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the proposed director typically takes about one day.
• The Certificate of Incorporation is usually issued within 3-5 days after submitting all required documents.
• The entire OPC registration process, including document submission and approval, typically takes around 10 days.

Features and Benefits of One Person Companies

One Person Companies (OPCs) allow owners to separate personal and business assets. They provide simplified compliance requirements, and 100% ownership control. OPCs are ideal for solo entrepreneurs seeking to formalise their business while enjoying benefits like tax efficiency and credibility.

Features of an One Person Company

OPCs allow for easy formation with no minimum capital demand. They offer independence, tax benefits, and protection of personal assets, with a nominee ensuring continuity in case of the owner’s absence.

Here are the key features of a One Person Company Registration:

• Sole-Proprietorship: When a single individual owns the whole enterprise and runs it accordingly, sole ownership conveys to him full control of the business.
• Limited Liability: To protect the owner’s private estate from claims of creditors of the business in order to make it financially responsible for losses at the level of investment in the enterprise.
• Perpetual Succession: If the owner dies, the company continues to operate, ensuring continuity of business activity.
• No Minimum Requirement of Capital: An OPC does not require a specific minimum amount of capital to set up, hence it is open to all entrepreneurs.
• Nominee Appointments: The owner would need to assign a nominee who would take control of the company upon the demise of the owner or if the owner is debarred from managing it.
• Separate Legal Entity: An OPC is distinct from an owner from a legal view: it would contract, own property, and face legal actions in its own name.
• Simplified Compliance: With respect to other institutions, OPC does have relatively fewer regulatory requirements, thus making it easier to run the company.

Benefits of an One Person Company

The OPC has many benefits, which include limited liability, total authority over decisions, fewer compliance requirements, an independent legal identity, and simple incorporation, among others, because it has only one owner; all these factors make the OPC ideal for small businesses and individual entrepreneurs. 

Key benefits of an OPC include: 

• Complete Ownership and Control: The sole shareholder has complete power to make all decisions without input or approval from anyone else, thereby providing complete autonomy. 
• Limited Liability: The company’s liabilities keep the owner’s personal assets shielded from the company, thus creating a real separation between business and personal finances. 
• Simplified Compliance: OPCs are required to comply with less of regulatory obligations; in fact, there is no requirement for annual general meetings. 
• Tax Advantages: An OPC may be eligible for the lower rates of taxation than any other business structure, according to the existing tax law. 
• Easy Formation: Setting up an OPC is very easy and has little documentation to do. 
• Nominating Appointment: A nominee is needed to run the company in case of the death or incapacity of the owner.

OPC Compliances

Being formed as a One Person Company (OPC) in India requires annual compliance for maintaining its legal validity. This compliance would attract penalties or other serious legal consequences, if not observed. Below is a checklist for compliance action to remain on track.

One Person Company OPC Compliance Checklist:

• OPCs shall file annual returns with the Registrar of Companies (RoC).
• Form AOC-4: Filing the company’s financial statements.
• Form MGT-7: Filing the annual return containing particulars relating to shareholders and directors.
• Statutory Audits: Though an one person company is not obliged to hold annual general meetings, its financial statements are statutorily required to be audited. This ensures conformity of financial statements to the Companies Act along with being true and correct.
• Income Tax Filing: OPCs are required to file an income tax return each year under section 139 of the Income Tax Act.
• Board Resolutions: Although OPCs are exempt from certain corporate formalities, important decisions, such as approval of finances, should still have formal documentation in the form of resolutions.
• Nominee Confirmation: Notification to the RoC in writing is a clear requirement if the nominee suffers any change.
• Filing of Financial Statements: Ensure OPC financial statements receive director approval and signature before submission.
• Non-Compliance Penalties: Non-compliance obligations may subject to the following:

Penalties on late filing of returns

• Fees for late payment for non-compliance with tax filings.
• Fines or other legal actions when audits are missed.

Is Audit Mandatory for One Person Company?

Yes, an audit is mandatory for an one person company (OPC), regardless of its turnover or capital. The financial records of an one person company must be audited annually by a statutory auditor to ensure compliance with the Companies Act. This audit ensures that the company’s financial statements are accurate and true, thus maintaining transparency and accountability in its operations.

Mandatory Compliance Requirements

Here are some key compliance requirements for businesses:

• Board Name of the company: The name of the company and registered office address should display legibly outside of every office or business location.
• Head Company Paper: Letters, billheads, and other stationery must have the company name, address, CIN, phone number, and email appear in the heading.
• Annual Returns: The returns must be filed by obligated businesses at prescribed intervals, such as the case of private limited companies, which have 60 days to file the annual returns.
• Financial Statements: Submission of financial statements for the companies so that the records can be officialised and come under the scrutiny of the regulatory authorities.
• Appointment of Auditor: Every company is necessary to appoint an auditor who reviews all the financials of the company and submits an audit report. For example, even an OPC has to file the same by filing Form ADT-1. 
• Commencement of Business Certificate: Companies that registered with a share capital after November 2019 have to get the Commencement of Business Certificate before starting commercial activities.

• Risk Management: Businesses would need to take proactive measures in analyzing and addressing possible risks related to compliance and financial implications.

Compliance ensures that a company operates legally and ethically, gaining trust from customers and maintaining employee retention.

Compliance Exemptions for OPC

One Person Companies have been accorded some exemptions in terms of compliance criteria and other types of companies. Some of those exemptions are as follows:

• Annual Return Filing: The company is required to submit its annual return (MGT-7A) to the ROC within 60 days after the financial year ends.
• Financial Statements: The company must file its financial statements in Form AOC-4 within 180 days from the close of the financial year.
• Board Meetings: If there are multiple directors, one board meeting must be held every six months. If only one director exists, no board meeting is necessary.
• Auditor Appointment: An auditor must be appointed within 30 days of incorporation using Form ADT-1.
• Income Tax Return: The company must file its annual income tax return (ITR-6) by 30th September every year.
• Director KYC: The company is required to submit Form DIR-3 KYC annually for director KYC compliance.
• Conversion: The company must convert into a public limited company if its paid-up capital exceeds ₹50 lakhs or turnover surpasses ₹2 crores.

All these by way of exemptions lead to smooth operations for an OPC making it well-suited for the individual entrepreneur or small business.

Why Choose an OPC?

Opt for a One Person Company (OPC) if you’re a solo entrepreneur seeking limited liability protection, a distinct legal identity for enhanced business credibility, and a simplified compliance process. This structure gives you full control over decision-making while allowing you to raise capital as a private entity. It’s an ideal choice for small businesses with a single owner who wants to shield personal assets from business risks while reaping the benefits of a formal company structure.

Conclusion on One Person Company

In conclusion, a One Person Company (OPC) offers a unique structure for solo entrepreneurs to enjoy the benefits of limited liability, separate legal identity, and simplified compliance. It’s an ideal choice for individuals who wish to operate their business independently while protecting personal assets. By understanding the process of formation, key features, and ongoing compliance requirements, entrepreneurs can make informed decisions about using an OPC to formalise and grow their business. For further assistance with forming or managing your OPC, reach out to business consulting services.

FAQs About One Person Company

Can an OPC operate in more than one sector?

Yes, an OPC can operate in multiple sectors, provided the activities are in line with the company's objectives as stated in its Memorandum of Association (MoA).

What is the role of a nominee in an OPC?

The nominee in an OPC acts as a successor to the sole owner in case of death or incapacity. This ensures the continuity of the business.

What happens if an OPC exceeds its turnover limit?

If an OPC exceeds the prescribed turnover limit of ₹2 crore, it must convert into a private or public limited company within six months.

Can an OPC get loans or funding?

Yes, an OPC can apply for loans and other funding options from financial institutions, although certain requirements must be met for loan eligibility.

Is GST registration mandatory for OPCs?

GST registration is mandatory for OPCs if their turnover exceeds the prescribed threshold for GST applicability.

Are there penalties for failing to comply with OPC regulations?

Yes, penalties may be imposed for non-compliance with OPC regulations, including failure to file annual returns and maintain statutory records.

Can a foreigner or NRI register an OPC in India?

A foreigner or Non-Resident Indian (NRI) is not permitted to register a One Person Company (OPC) in India. Only Indian citizens who are residents of India are eligible to establish an OPC.

Is it possible to convert a private limited company into an OPC?

Yes, a private limited company can be converted into an OPC if it meets the eligibility criteria and follows the necessary procedures.

What is the maximum capital allowed for an OPC?

An OPC must compulsorily be converted into a Private Limited Company if:

• The paid-up capital surpasses ₹50 lakhs.
• The turnover exceeds ₹2 crores in any given financial year.

Can an OPC engage in export-related business activities?

Yes, an OPC can engage in export-related activities, as long as the business complies with the legal and regulatory requirements for export activities in India.