A One Person Company form of business is the latest addition to the Indian business ecosystem. This form of business was mainly introduced for the benefit of individual entrepreneurs who would otherwise choose sole proprietorship. The One Person Company is popularly known to be an upgrade of the sole proprietorship business with added benefits of Public Company form of business.
Apart from the many benefits, fewer compliances to abide by in a one person company is a big game changer for single entrepreneurs in India.
Introduced by The Companies Act, 2013 (No.18 of 2013), an OPC form of business aims to support small time entrepreneurs who may be carrying on a business as a sole proprietorship firm to enter the corporate framework of any industry.
If you are a single owner of the firm, there are certain compliance to check off before registering a one person company. A few important ones are listed below:
1. An OPC should have a minimum of one director and a maximum of fifteen directors.
2. It is compulsory for the registrar to be a citizen of India in order to form an OPC.
3. A person cannot incorporate more than five OPCs.
4. An OPC cannot convert itself to any form of the company unless two years have been expired from the date of incorporation of an OPC.
And in case the company revenue hits more than 2 crores or has a paid-up capital of over fifty Lakhs, it must be turned into a public or Private Limited Company within six months.
5. An OPC has perpetual existence, although to make this possible, there must be a nominee director to take charge in case of death or disability of the sole member.
6. An OPC is not allowed to carry out Non-Banking Financial Investment activities such as investment in securities of any corporate body.
7. A requirement of Annual General Meeting (AGM) and Extra-Ordinary General Meetings do not apply to an OPC.
8. An OPC must pay 30% of tax on profits. A minor cannot be a member or nominee of the OPC or can hold.
9. A minor cannot be a member or nominee of the OPC or can’t be the shareholder.
It is true that an OPC offers a suitable company form for a rising entrepreneur; it still has important requirements that need to be looked into well before opting to form a One Person Company.