In order to increase the number of entrepreneurs in India, the OPC was established to help them contribute more to the economy, but how effective is it?
In the Company Act of 2013, the one person company (OPC) concept was introduced. A one person company can be formed by a single promoter, which is different from a private limited company, which needs at least two directors and two members to incorporate, but this structure does not require any more than one person. A single individual could not form a corporate entity before this change was made in India.
Arkan Diary (OPC) Private Limited and Truffle House (OPC) Private Limited are two one-person companies. In this article, you will discover the probable reasons why companies in India are formed by one person.
Features Of The One Person Company
- Companies Act, Section 3(1)(c) defines OPCs as private companies
- There is no perpetual succession for OPCs. After the death of the sole member, the nominee has the option of accepting or rejecting sole membership in the one-person company
- The liability of a one-man company is limited in India
- A single shareholder or member can also be the only shareholder of an OPC
- An OPC must have at least one director. Its number can be capped at 15 directors.
Registering for the OPC: Incentives
How does starting a one-person business benefit you? Basically, yes. This section illustrates some of the benefits of registration with the OPC.
Funding Is Easy To Obtain
In contrast to unregistered private and proprietary businesses, companies are more likely to receive financial assistance from banks and other financial institutions. Before granting businessmen financing, most banks require that they restructure their business into a private limited company. Thus, registering your company as a one-person company is preferable to registering as a proprietary organization. Furthermore, since OPCs are incorporated companies, they have an advantage when obtaining bank loans over sole proprietorships.
Norms Are Relaxed
Finance minister introduced several incentives for OPC incorporation in the union budget 2021-22. A company can now convert into any type of company if it meets the minimum requirements under the Companies Act of 2013. The thresholds for paid-up capital and turnover were raised in the budget for 2021-22 from *50 lakhs to *2 crores and *2 crores to *20 crores, respectively. A change in Indian law now allows NRIs to form one-person companies. Indian citizens can also apply for an OPC after spending 120 days instead of 182 days in the country.
Fewer Compliance Requirements
A variety of exemptions have been granted to OPCs, resulting in fewer compliance requirements than for other company structures. Company secretaries are not required for one-person companies, and the books of accounts do not need to be signed by a company secretary.
One-person companies also have the following compliance advantages:
- There is no requirement for a general meeting
- One-man companies with only one director on their board are not required to comply with Section 174 (quorum for board meetings).
- Despite the expiration of the maximum audit period, the rotation of auditors is not required
- One-person companies are exempt from sections 98 and 100 to 111. Those sections regulate general meetings.
Limited Liability Privileges and Legal Status
A company registered with OPC can be converted from an unorganised proprietorship into a private limited company. It is a separate legal entity that protects the person who incorporated it, as it is a separate legal entity. Member’s liability is limited to their shares, and they are not personally liable for the company’s losses. Despite the disadvantage of unlimited liability for proprietorships, this disadvantage can be avoided through an OPC structure that limits member liability.
Conclusion
It’s time to begin implementing your one person company ideas now that you know everything about starting a one person company.
Incorporating a corporation generally takes 15 days after obtaining all the necessary documents, completing the application process, obtaining approval for the company name, and finally incorporating the company.
A one-person company would then need the help of an expert. A team of experienced professionals ensures our clients receive a hassle-free and affordable incorporation process. As a result, when you partner with us, the incorporation process is seamless and hassle-free.