One Person Company

A significant advantage now available to sole proprietors is the option to establish a One Person Company (OPC) instead of operating as a sole proprietorship. This structural change brings several key benefits:

Firstly, an OPC establishes a distinct legal identity, meaning the company and its owner are treated as separate entities in the eyes of the law. This separation offers crucial protection.

Secondly, it introduces the principle of limited liability. The owner's financial responsibility is limited to the value of the shares they hold in the company, safeguarding their personal assets from business debts and obligations.

Thirdly, an OPC provides continuity. Unlike a sole proprietorship, the company's existence is not tied to the life of its owner; the business can continue even if the owner passes away.

Lastly, any loans or financial obligations incurred by the OPC are primarily the company's responsibility, not the sole personal liability of the owner.

 INCORPORATION OF THE COMPANY

• Apply for a name in Form INC-1

• Draft Memorandum and Articles of Association

•  File Form INC-2 along with Memorandum and Articles to the Registrar of Companies. 

• The subscriber to the Memorandum shall nominate a person in Form INC-2 after obtaining the consent in Form INC-3. 

• Receipt of Certificate of Incorporation/Registration from the Registrar.    

  
  

REGULATORY COMPLIANCE

No one can become the member or nominee for more than 1 OPC. The words “one person company” should be mentioned in brackets below the name of the company. It should conduct at least one Board Meeting in each half of the calendar year and the gap between two meetings should not be < 90 days.

 EXEMPTION TO ONE PERSON COMPANY

Not required to hold Annual General Meeting.

Not required to prepare Cash Flow Statement

Not required to hold Board Meeting if only one director is there.

Annual Return can be signed by the director if it does not have a Company Secretary

CONVERSION INTO PRIVATE OR PUBLIC COMPANY

Where the paid-up share capital of the company > Rs. 50 Lakhs or its average annual turnover > Rs. 2 Crore during three consecutive financial years immediately preceding the financial year

          Within 60 days give a notice to the Registrar in Form INC-5.

          Within 6 months convert itself into a private or public company.