Starting One person company (OPC) in India

Till last year, it was not possible to form a private limited company without two subscribers or shareholders. With the introduction of new Companies act 2013, an individual can set up companies alone without taking another subscriber or shareholder.

With this new concept, small entrepreneurs can set up a one person company (OPC) without sharing their profits with another individual. They can register with just one shareholder with limited regulatory costs and other requirements.

Earlier to this an individual use to work as a sole proprietor and their business had no separate legal status in India. Now OPC can help them to do business as an enterprise and give them an opportunity to start their own venture.

The process of setting up a one person company is same like a private limited company with little difference regarding nomination of another person in case of death of the owner. Anyone interested in forming an One Person Company, can form such company by following the procedures of registration with their state ROC.

Starting a Open person company (OPC) in IndiaWhile forming an OPC it’s not required to mention the name of first director in the Article of association. The owner who is a shareholder or subscriber to the memorandum of association will be treated as the first director of the company.

After incorporation of one Person Company, it is mandatory for the company to clearly specify “one person company” within bracket below the name of the company, wherever its name is printed, engraved or affixed.

Advantages of forming a One Person Company

  • Separate legal entity i.e. the one person company and the shareholders are separate persons. If the company embroiled in a legal controversy, the owner will not be sued, but the company will.
  • Personal assets of the owner or shareholders are protected in case of credit default.
  • Liabilities of the shareholders or directors are limited up to their share capital contribution in to the OPC.
  • OPC can have one director up to a maximum of 15 directors.
  • It can also use the name of private limited at the end of its name.
  • A one person company is not required to have annual general meeting.

Disadvantages of Forming a OPC

  • The base income tax rate for a one person company is 30% which may result in a higher tax as compare to the income tax slab rates of an individual (i.e. 10% to 30%).
  • Setting up a OPC involves more paper work compare to a sole proprietorship.

OPC is new to India but it’s already in practice in different countries like Singapore, UK, USA or Europe.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.