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A new concept has been introduced in the Company’s Act 2013, about the One Person Company (OPC). In a Private Company, a minimum of 2 Directors and 2 Members are required whereas in case of Public Company, a minimum of 3 Directors and a minimum of 7 members. Previously, A single person cannot incorporate a Company.
One Person Company (OPC) is a company incorporated by a single person. Before the enforcement of the Companies Act, 2013, a single person could not establish a company. If an individual wanted to establish his business, he/she could opt only for a sole proprietorship as there had to be a minimum of two directors and two members to establish a company.
As per Section 2(62) of the Company’s Act 2013, a company can be formed with just 1 Director and 1 member. In case of One Person Company compliance requirement is low in comparison with Private Company.
The Companies Act, 2013 states that an individual can form a company with one single member and one director. The director and member can be one and same person. Thus, one person company means one individual who may be a resident or NRI who can incorporate his/her business that has the features of a company and the benefits of a sole proprietorship.
1.Minimum One People: One person is required to start the OPC in India. These companies shall have minimum one director and one member. The same person can become member and director of the company.
2.No Minimum Capital: As no minimum paid up capital is required to start OPC, it total depends on the need of the business. However, Minimum authorized and subscribed share capital required for OPC is Rupees one lakh.
3.One Resident Director: Among director, one person must be resident Indian.
4.Unique Name: The name of the OPC should be unique and should not be similar to the any existing company name or trademark.
- Step 1: Name reservation
The first step in incorporation is to get Company Name approval. The selected name selected should do not contain any word which is prohibited under Companies Act, 2013. An approved name is valid for a period of 20 days from the date of approval, for a new company that means the approved name can be used for incorporation within the given time period. Through Form SPICE (INC-32) both name approval and company registration can be applied simultaneously.
- Step 2: Digital Signature Certificate (DSC) of Director and Shareholder
Firstly, it is mandatory for all the directors and shareholders of One Person Company who is authorised to sign the important documents to get his Digital Signature Certificate online. Digital signatures are mandatory to file the forms on the MCA portal. Important documents required for DSC issuance are - Photo, ID and Address proof.
- Step 3: Director Identification Number (DIN)
It is a unique identification number issued by Registrar of the companies (ROC) to a person who want to act as a director of the company. If proposed directors already have approved DIN, then that will be used and if proposed directors do not have approved DIN, then DIN will be approved simultaneously with Registration of company.
- Step 4: Approval of other authorities
The Registrar of Companies may require the applicant to furnish the approval or concurrence of any department, regulatory body, appropriate authority, or Ministry of the Central or State Government(s) in relation to the work to be done.
- Step 5: Document submission
Application for registration/incorporation of OPC is made to Registrar of Companies (ROC) along with Memorandum and Article of Associations, declaration, affidavits etc.
- Step 6: Certificate of Incorporation
After scrutinizing the incorporation form and documents, if ROC finds the documents are in order, issues Certificate of Incorporation which is the Registration certificate of OPC. After receiving the certificate of Incorporation, the OPC can start its operation.
- Step 7: PAN & TAN of the company
PAN and TAN are simultaneously applied along with company registration forms and are mentioned in Certificate of Incorporation.
- Step 8: Opening of Bank Account
On submission of Certificate of Incorporation & other essential documents, open current account in name of company for smooth running of the company.
a. Legal status
The OPC receives a separate legal entity status from the member. The separate legal entity of the OPC gives protection to the single individual who has incorporated it. The liability of the member is limited only to the extent of shareholding they held in the Company. Thus, the creditors can sue the OPC and not the member or director.
b. Easy to obtain funds
Since OPC is a private company, it is easily raising funds through venture capitals, angel investors, incubators etc. The Banks and the Financial Institutions prefer to grant loans to a company rather than a proprietorship firm. Thus, it becomes easy to obtain funds.
c. Less compliances
Compliances to be followed by One Person Company is less in comparison to partnership firm, like the OPC need not to prepare the cash flow statement. The company secretary need not to sign the books of accounts and annual returns which is to be signed only by the director.
d. Easy incorporation
It is easy to incorporate OPC as only one member and one nominee is required for its incorporation. The member can be the director also. The minimum authorised capital for incorporating OPC is Rs.1 lakh but there is no minimum paid-up capital requirement. Thus, it is easy to incorporate as compared to the other forms of company.
e. Easy to manage
Since a single person can establish and run the OPC, it becomes easy to manage its affairs. It is easy to make decisions very quick. The ordinary and special resolutions can be passed by the member easily by entering them into the minute book and signed by the sole member. Thus, running and managing the company is easy as there won’t be any conflict or delay within the company.
f. Perpetual succession
Since at the time of incorporation one nominee is required to be appointed by the single member of OPC, so even in case there is only one member in OPC, OPC will said to be in existence. Therefore, upon the member’s death, the nominee will run the company in the member’s place.
Documents required to form One Person Company
Identity proof of Directors and Shareholder
- PAN Card for Indian Nationals (Mandatory)
- Passport for Foreign Nationals (Mandatory)
- Proof of nationality for Foreign Nationals
- Proof of Identity (Voter ID/Passport/Driving License) (any one)
- 2 Passport size photos each of Directors and Shareholders.
2. Address proof of Directors and Shareholder
- Latest bank statement/bank passbook, telephone bill, mobile bill, electricity bill or gas bill should be submitted as residence proof. Such bill or statement shouldn’t be older than 2-3 months.
3. Proof of Registered office
- Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts (any one)
- Copy of the utility bills (Telephone/Gas/Electricity bill) (not older than two months) (any one)
No-Objection letter from the Owner of Property to use his Property for Company Formation.
|Section & Rules||Forms||Particulars|
|164(2), 143(3)(g)||DIR-8||Disclosure that directors is disqualified or non-disqualified in each financial year.|
|184(1)||MBP-1||Disclosure by every Director about its Interest in other Entity at each financial year in First Meeting of the Board of Director Fresh MBP-1 is required to be submit whenever there is change in director interest from the previous disclosure.|
|Rule 12A||DIR-3||By all the Directors of the company shall file DIR-3 on or before 30th September every year.|
|Section 405||MSME-1||Company to file MSME-1, half yearly with respect to pending payments to MSME vendors as at end of half year. April to Sep: 30th October October to March: 30th April|
|Section 73, Rule 16||DPT-3||To be filed every year on or before 30 June in respect of return of Deposit and particulars not considered Deposits as on 31st March.|
|Section 139||ADT-1||Auditor will be appointed for 5 years in form ADT-1 within 15days of Annual General Meeting.|
|Section 92||MGT-7||OPC fill its annual return within 180 days from the closure of the financial year.|
|Section 137||AOC-4||Company is required to file its Balance sheet along with Statement of Profit and Loss Account, Director Report and Auditor report within 180 days from the closure of financial year.|
OPC Return Filing FAQ’s
Person who is an Indian citizen and resident in India shall only be eligible to act as a member and nominee of an OPC. For the above purpose, the term “resident in India” means a person who has stayed in India for a period of one hundred and eighty-two days or more during the immediately preceding one financial year.
A person cannot be a member of many OPC. He can be a member of only one OPC.
There is no specific tax advantage to an OPC over any other form. The tax rate is same as of company i.e. flat 30%. The tax provisions like MAT & Dividend Distribution Tax applies as they apply to any other form of company.
In case the paid-up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into a private or public company.
The basic mandatory compliance comprises:
- At least one Board Meeting in each half of the calendar year and the time gap between the two Board Meetings should not be less than 90 days.
- Maintaining proper books of accounts.
- Statutory audit of Financial Statements.
- Filing of business income tax returns every year on or before 30th September.
- Filing of Financial Statements in Form AOC-4 and ROC Annual Return in Form MGT 7.
One person company cannot be formed by a minor, a foreign citizen, a Non-Resident.
One person company mandatorily convert an OPC to a private limited company, if it meets the certain criteria:
- The effective date of increase in the paid-up share capital of a One Person Capital is beyond 50 lakhs, and
- An increase of average annual turnover during the period of immediately preceding three consecutive financial years is beyond 2 crores.
Converting into either a private or a public company must be done within a period of six months.
- When a One Person Company gets incorporated, it can convert itself to a Private or Public company only after two years from the date of incorporation.
- After 2 years OPC can apply for conversion.
- The conversion process should be done as per the rules and regulations laid down by the Companies Act, 2013.