OPC Registration Advantages

Easy Funding

Akin to private limited companies, a one-person company can raise funds via angel investors, venture capitals, incubators, etc. Since an OPC is acknowledged as a registered company and not as a proprietorship, banks and financial services companies are open to granting it loans. For OPCs, funding thus becomes easy.

Limited Compliance

As per the Companies Act, 2013, OPCs are exempt from certain compliance requirements. For instance, an OPC is not obligated to create cash flow statements. The books of accounts and annual returns are not required to be signed by the company secretary and may instead only be signed by the director.

Easy to Incorporate

Incorporating an OPC is a simple process since its incorporation requires only one member and one nominee. The member may also be allowed to serve as its director. Setting up an OPC would require a minimum authorized share capital of Rs. 1 Lakh. However, it would not compulsorily require a minimum paid-up capital. These aspects make the incorporation of an OPC a very easy process.

Easy Management

Since an OPC can be set up and handled by an individual, its management tends to be quite easy. Because of this ease of management, its decision-making can be expedited.

Enjoys Legal Status

Unlike in the case of a sole proprietorship, an OPC enjoys the status of a separate legal entity. This allows a director’s and a shareholding member’s liabilities to be limited only to their shares and they cannot be made liable for the company’s loss whatsoever.

Enjoys Perpetual Successions

An OPC can enjoy perpetual succession. At the time of an OPC’s incorporation, the director must appoint a nominee who can continue the company’s operations in the event of the former’s death or inability to discharge his/her roles and responsibilities.

Downsides of an OPC

• OPCs are Mostly suited for small business structures
• For OPCs, the scope of diversifying businesses is limited
• No possibility of differentiation between the ownership and management as in an OPC, only one member is empowered to make all decisions; this may lead to low accountability in a business

The Registration Process of an OPC

The registration process of a one-person company involves the following steps:

Step 1: Applying for a Digital Signature Certificate (DSC) for the Director. This requires the furnishing of the following details: ID and Address Proofs such as PAN card, Aadhar, a photograph of the proposed Director, his/her phone number as well as the email ID.

Step 2: Applying for Director Identification Number (DIN) The DIN for Director can be applied for using the comprehensive SPICe+ (INC-32) form. The ID and Address Proof of the director will need to be furnished for this purpose.

Step 3: Applying for Company Name Approval The name of the company must be reserved. As a sample, the naming shall be in the format “XYZ (OPC) Private Limited”. Being a comprehensive and integrated web form, SPICe+ is used for obtaining approval for the desired name. The significance behind choosing the desired name also must be mentioned in this form. Should the selected name be rejected, another name may be proposed through a fresh SPICe+ application form. When the name approval has come from the Ministry of Corporate Affairs (MCA), the applicant can proceed to the submission of mandated documents.

Step 4: Submission of Required Documents

The documents listed below must be submitted to the RoC:

• Articles of Association (AoA) – establishing the by-laws of the company on which it will function
• Memorandum of Association (MoA) – Defining the purpose of the company’s incorporation and its objectives
• The PAN and Aadhar of the director-appointed nominee along with his/her consent in Form INC – 3; such nominee will assume the director’s role and responsibilities should he/she die or get incapacitated
• Address proof of the proposed OPC’s registered office, the proof of the office premises’ ownership, and a copy of the rental agreement and the owner’s NOC (if the address is a rental property)
• Director’s declaration and consent on Form INC – 9 and DIR – 2 respectively
• Passport size photographs of the director and nominee
• DSC and DIN of the director
• A declaration that all compliance requirements have been fulfilled

Step 5: Submission of Forms to MCA The aforementioned documents are to be enclosed with the SPICe+, SPICe+MoA, and SPICe+AoA forms and must be accompanied by the DSC of the director for uploading to the MCA’s website to obtain approval for incorporation of the company. Since the SPICe+ is a comprehensive form that also includes the provisions for PAN and TAN application, the PAN and TAN are auto-generated during company incorporation.

Step 6: Issuance of the Certificate of Incorporation Upon completing all due diligence, the Certificate of Incorporation is issued by the Registrar of Companies (RoC) following which the OPC may start its business operations.

Note: IA new current account also must be opened with a bank before the OPC commences its operations

Duration for OPC Registration

The entire process of OPC incorporation spans approximately ten days, subject to departmental-level approvals and dispositions of applications.

FAQs

1) What makes a person eligible to form or be a member of an OPC?

A) Only Indian citizens who are residents in India are eligible to serve as a member and a nominee in an OPC. Here, the term ‘resident in India’ implies a person who has stayed in India for at least 182 days in the preceding financial year. Minors, foreign nationals, and non-resident Indians are not eligible to form an OPC.

2) Could a person serve as a member in multiple OPCs?

A)No, a person is allowed to serve as a member in only one OPC at a time.

3) What are the compliance requirements that an OPC must fulfill?

Following are the compliance requirements to be fulfilled mandatorily:

• An OPC must conduct a minimum of one board meeting in each half of the calendar year. No two board meetings must be spaced less than 90 days apart.
• Books of accounts must be systematically maintained
• An OPC must abide by the statutory audit of financial statements
• OPCs must file financial statements via Form AOC-4 and ROC annual returns via Form MGT 7
• They must file business income tax returns before the 30 th of September each year

4) SDo OPCs have any tax advantage over other types of companies?

A) No, OPCs do not enjoy any special tax advantage over other types of companies.