How to Register a One Person Company | A Comprehensive Guide

How to Register a One Person Company Are you planning to start your own company but do not have a partner to help you build your business? There’s no need to worry, as you still have an option of starting your own ‘one person company’. However, most of you might not be having a complete set of knowledge regarding the process of formation and legal requirements with respect to the incorporation of one person company. This article will brief you with the understanding of an OPC, the benefits of incorporating it and the legal formalities in its formation.

As per section 2(62) of the Companies Act, 2013, One Person Company is the one in which only one person is the member. The concept of one person company was introduced for the first time by the Companies Act, 2013. Before this, the old Companies Act of 1956, specifically provided that a minimum of two directors and shareholders are required to form a private limited company.

However, in case of a one person company, a single one person can act as the shareholder as well as the director of that company.

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Things to Keep In Mind Before Forming An OPC

The concept of OPC gives immense opportunities for sole proprietors and entrepreneurs who can take advantage of limited liability and corporations but were held back in doing so because of the non-availability of a second director or second shareholder. Following are the important points you should keep in mind before forming a One Person Company (OPC).

One person Company
  1. Only a natural person who was a resident of India in the previous year (i.e. he has stayed in India for more than 182 days in that year) shall be eligible to form an OPC. This means that any association of persons or body of individuals or company or any other entity cannot form OPC. A minor is also not eligible to be a member or nominee in an OPC.
  2. You cannot incorporate more than one OPC at a time.
  3. An OPC can either be a company limited by share or limited by guarantee or an unlimited company.
  4. Once an OPC is formed, you will still have to follow the minimum requirement i.e. the company must have an average annual turnover of Rs. 2 crore in the immediately preceding three financial years, failing which the company will lose its status.
  5. An OPC cannot carry out Non- Banking Financial Investment activities including investment in securities of any body corporate.

Why Should You Opt For One Person Company?

Various features of one person company and why you should opt for one person company are given below.

One Person Company Features
  1. One person: The best feature of this form of business structure is that you do not need any other person to start the business. It can solely run by one person. This will also ensure faster decision making and execution of plans. Further, OPC can appoint as many as 15 directors.
  2. Separate legal entity: In the eyes of law, a company and its member are separate entities.
  3. Ease to form & Free from compliances:  It is very easy to incorporate an OPC with limited documentation. Also, there is no mandate to conduct annual general or other regular compliances.
  4. Best suited for startups: The OPC helps startups entrepreneurs to easily test their business model and upon building a marketable product they can approach angel investors, venture capitalists for funding and easily convert their OPC into multi shareholder Private Limited Company.
  5. Better than proprietorship: In case of a One Person Company, your liability in case the business fails, is limited to only the business assets. In case of a proprietorship, the liability is unlimited and the creditors of your business can even take hold of your home and personal assets like your house, personal bank accounts, jewellery etc which can be used to settle the business liabilities.
  6. Less hassle: Companies are required to appoint statutory auditors, conduct general meetings but one person company is not required to follow any of these. Board meetings are not required for a One Person Company.

Minimum Requirements for Incorporating a One Person Company

Below are the requirements for incorporating a one person company.

  1. A minimum of one director
  2. Atleast one member
  3. Minimum share capital Rs. 1,00,000
  4. Director identification number
  5. Digital signature certificate
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Steps That You Should Undertake for Forming An OPC

Following are the steps you should undertake for One Person formation.

1. Get a Digital Signing Certificate (DSC)

The application for incorporating an OPC is filed online. Hence all the documents have to be also filed online. DSC helps to digitally sign all such documents and at the same time also ensures their authenticity. The Certifying Authority issues the Digital Signing Certificate.

 Here’s the list of registered Certifying Authorities (CAs):

  1. SafeScrypt CA
  2. National Informatics Centre
  3. IDRBT Certifying Authority
  4. E-Mudra
  5. (n) Code Solutions

You will get your certificate within a period of 1–3 days. However, now with the introduction of Aadhaar card the process has become quite easier. The Aadhaar card holders can get their certificates on the same day based on the e-KYC fulfillment. This certificate shall be valid for a period of one or two years after which you can get it renewed.

Once you have obtained your certificate you have to get it registered with the MCA. This is an important process for verifying the authenticity of the credentials submitted.

2. Fill the Application Form

In order to incorporate your company, you will have to fill the e- form (INC-32) and will have to submit it to the Registrar of the area within whose jurisdiction the registered office of your company will be located. The form must be accompanied by the following documents-

  1. Name of the company- Once you have decided the form of the company, you are also required to decide the name of the company. An applicant is required to provide at least six names in the order of their preference along with the meaning and significance of each word.This can be done by filling the INC-1 form.
  2. Memorandum of Association(MOA)
  3. Articles of Association (AOA) With the introduction of SPIC e-form, the applicant is now no more required to file the soft copies of MOA and AOA.
  4. Proof of identity of the member and the nominee
  5. Residential proof of the member of the nominee
  6. A copy of PAN card of member and nominee
  7. Consent of nominee in form INC-3
  8. An affidavit from the subscriber and the first director to the memorandum in Form INC-9
  9. Specimen signature in Form INC- 10
  10. Copies of the utilities bill
  11. Consent from the directors
  12. Details of stamp duty
  13. Declaration by an advocate/CA/CWA/CS who has been engaged in the incorporation procedures stating that all the legal requirements of the Companies Act in respect of incorporation have been complied with.
  14. Information about registered officeor the address for correspondence in case the same is not finalized. Within 15 days of incorporation, you need to file e-Form INC-22 to communicate the final or any change in the registered office address. However, if the company’s registered address is the same as the one mentioned in INC-32, INC-22 is not required.

After completing all the formalities, the subscriber shall receive the final incorporation certificate from the registrar of the companies.

How to Convert Your OPC to a Private Limited Company?

One person company

You can also get your OPC converted into a Pvt. Ltd. company. Once your company reaches a paid up capital of Rs. 50 lakh or more or when the average turnover of the company becomes Rs. 2 Crores or more for a period of 3 years from the date of incorporation of OPC, then the company can be converted into a private limited company after making the necessary changes in the memorandum of association and articles of association. 

After conversion, the company will have to necessarily comply with all the requirements of a private limited company.

There is also an option of conversion of a private limited company into a one person company. A private limited company having a paid up capital of not more than Rs. 50 lakhs or an average annual turnover for the past 3 years, less than Rs. 2 crores, can get itself converted into a one Person Company and enjoy the benefits as such.

With the introduction of one person company entrepreneurship in India has been taken to a new level which help small traders and innovators to start business with ease. Individuals can now form a company without a need of a partner.

However, this is not it. There are so many levels from here on.

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FAQs on One Person Company

Following are the frequently asked questions about one person company.

What are the requirements for forming an OPC?
OPC stands for One Person company. It is a company whose shareholder is only one person. That person will have a 100% share of the company, and the person’s age should be 18 or older.

How many OPCs can a person have at a time?
A person can have only one OPC at a time. He or she should not be a member of more than one OPC.

Is GST registration mandatory for OPC?
GST registration is mandatory for OPCs selling goods and services. If the company has annual sales of Rs 20 lakh for services and Rs 40 lakh for goods, then GST registration is mandatory.

Can OPC hire employees?
Yes, OPC can hire employees. OPC means that a single person will have a share of 100% of the company. It has nothing to do with hiring employees. You can hire as many employees as you want.

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