An One Person Company (OPC) is a hybrid structure, wherein it combines most of the benefits of a sole proprietorship and a company form of business. It has only one person as a member who will act in the capacity of a director as well as a shareholder. Thus, it does away with the hassles of finding the right kind of co-partner/s for starting a business as registered entity. The best part is, legal and financial liability is limited to the Company and not the member. Hence, you do not need to share your piece of cake in the name of partnership. You have an idea...You own it!
Incorporate your OPC
- The process of incorporating the OPC is almost similar to that of a private limited company with minor differences.
- OPC will be formed as a ‘Private Limited Company’.
- It will have only one person as member. Memorandum of Association of such a company will mandatorily prescribe the name of the person, who in the event of death or disability of the subscriber shall assume his position.
- The member of the OPC will have the right to change the nominee at any time with due intimation to the Registrar.
- OPC can be formed as company limited by share capital or limited by guarantee or unlimited company.
- The words ‘One Person Company’ will have to be mentioned in brackets below the name of such company, wherever its name is printed, engraved or affixed.
- One person can form only one OPCs.
Relaxations available to OPCs in comparison to general private limited companies
- Provisions of Annual General Meeting (AGM) and Extra-Ordinary General Meetings do not apply to an OPC.
- An OPC should have a minimum of one director and a maximum of fifteen 15 directors.
- In case the Board consists of only one director, then the OPC is exempted from the requirement of conducting a Board Meeting as well.
- It will be deemed to have complied with the provisions relating to Board meetings, if at least one meeting is conducted in each half of the calendar year.
- However, the gap between the two meetings should not be less than ninety 90 days.
- There is no requirement of appointing a first director for the company. The sole member is deemed to be the first director.
- The OPC is also exempt from provisions relating to notices of the meetings, statement to be annexed to notice, Quorum for Meetings, Appointment of Chairman of Meeting, Proxies, Restriction on Voting Rights, Voting by show of hands, Voting by Electronic Means, Demand for Poll, Postal Ballot and Circulation of Member’s Resolution.
How is OPC different from sole-proprietorship?
- First and foremost, simply because OPC has a separate legal entity from its owners. In case of sole proprietorship, there is no distinction between the two entities. This means that the liability of the owner is separate from the entity. Or in other words, the threat of lien on personal property in case of unmet liabilities is non-existent.
- Personal financial trustworthiness and credit ratings of the owner does not affect the ratings of the OPC, at least not directly.
- Owing to the feature of it having a separate legal entity from its owners, the OPC is taxed separately, unlike a sole proprietorship.
- Undoubtedly, the compliances in an OPC are a bit more tedious as compared to sole proprietorship.
Is there any threshold limits for an OPC to mandatorily get converted into either private or public company?
In case the paid up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover exceeds during the relevant period exceeds two crore rupees, then the OPC has to mandatorily convert into private or public company.