What is One Person Company

What i OPC? - Full form, Definition and Benefits

The most prevalent types of corporate legal entity for small business at an initial stage which is started, managed and executed by a single individual is One Person (Private Limited) Company - OPC. 

Government of India promotes the entrepreneurs of the country and thus it has brought in new and more beneficial schemes for their growth and advantage. OPC is a product of that idea. It is said that “A One Person Company is a paradigm shift in the Indian corporate regime, bringing it at par with global standards.” As per section 3(1)(c) of the Companies Act, 2013, an OPC may be formed for any lawful purpose by one person being a citizen of India. 

Commonly known as OPC, One Person Company is also an old school concept, similar to that of a proprietorship business, where just one person is whole and sole of the business. But the new thing here is that instead of small scale Proprietorship business now we can Incorporate a Company which in other words is a large scale Proprietorship REGISTERED with Central Government. Here there is just one human being who is whole and sole of the Incorporated Company. This person is both Manager as well as Owner i.e. Direct and Shareholder and no one else has any major role in this entity, as far as decision making and ownership is concerned.

If we talk technically i.e. in legal language, One Person can be introduced as follows - 

As per provision of section 2(62) of the Companies Act, 2013 defined (62) “one person company” means a company which has only one person as a member.

For the formation of OPC - Only a natural person who is an Indian citizen and resident in India­­-

• shall be eligible to incorporate a One Person Company;

• shall be a nominee for the sole member of a One Person Company.

The term “resident in India” means a person who has stayed in India for a period of not less than 182 days immediately preceding one calendar year.

To every businessman, who is at an initial stage, the question appears - 

What is the Registration of Business..?

Why should I register a COMPANY instead of the PROPRIETORY business..?

So, to answer the WHATs - technically, when any Proprietorship entity is registered with Government of India (namely, Ministry of Corporate Affairs), it is called as One Person Company (OPC) 

and then only you can avail the benefits that any OPC is offered by the Central Government i.e Limited Liability, Existence beyond life of founders, Tax concessions, etc.

And to answer the WHYs - well, let’s discuss the benefits in detail...

When a business is INCORPORATED, it gives numerous benefits, which you are deprived of while being a Sole Proprietor entity. 

The most beneficial advantage of an OPC is that a person can start a business, however risky, without the fear of unlimited liability threatening his very existence and he can independently carry out business under the company structure i.e. as One Person (Private Limited) Company.

Benefits that a Registered One Person Company reaps are as shown below

# It is considered as a Separate Legal entity which means that it becomes its own legal business structure, separate from the individuals who had found the business;

# It gives you Protected Liability. Let’s put it this way - when you start a business as a proprietorship, you put extreme efforts and most importantly you invest a lot of money, from every source possible. As the founder and owner, you are responsible not only for the benefits, assets and profits but also for all the debts, liabilities and losses; here, responsible means, personally liable for debts and liabilities.

However, when your business entity is an Incorporated Company i.e registered as a One Person Company, you are responsible only for that amount of money which you personally invested. Your personal assets cannot be used to satisfy the debts and liabilities of the incorporated business entity.

# It separates Management from Ownership so eventually, Directors are the managers of the business and its day to day activities. Whereas, Shareholders who are the actual owners,  reaps the benefits of the investment they made into the business.

# Also, when your entity is registered with Central Government, namely MCA, an Incorporate Company i.e registered as a One Person Company, it has more credibility with potential customers, vendors and employees which is helpful for efficient operations.

# Most importantly, it helps you in expansion. This credibility helps you expand your business both organically and inorganically.

# There’s a unique provision in OPC which will ensure continuity of the life of the Company. The memorandum of association, popularly known as MOA of an OPC shall indicate the name of another person who is mentioned as NOMINEE (with his/her prior written consent), who shall, in the event of the Director’s death or his incapacity to contract become the member of the company. 

Exemptions provided to One Person Company : 

As said earlier, the Government of India promotes the entrepreneurs of the country and thus it has brought in new and more beneficial schemes for their growth and advantage of the proprietors of One Person Company. 

OPCs have been provided with a number of exemptions and therefore have lesser compliance related burden - 

• OPC is not required to prepare cash flow statement as a part of financial statement. 

• If an OPC does not have a company secretary, the annual return can be signed by the director of the company. 

• An OPC is not required to hold an annual general meeting.

So now as you have understood the concept of One Person Company, let's move onto deciding the following factors - 

1. Decide which business type is best for your business and goals - Proprietary Business or Business having multiple minds & ideas.

2. Decide how many persons shall be in the business as Directors (Managers) and as Shareholders (Investors/Members) or shall there be just One person who is whole and sole of business (Director) 

3. Decide where you would like to start your business from - it could even be your home..!

4. Decide how much investment (capital) will be required to start this business and how much could you bring in out of your own pocket..? (investment taken from external sources shall be kept aside)

5. Decide when would you like to execute the business ideas you have.

Once you get answers to all these questions, and if they match with the criteria of a One Person Company i.e 

• a Proprietary business 

• where there is One Director who is both manager and shareholder of the company and 

• could have One Nominee who could take care of this business if this Director person is incapacitated (due to death, physical incapacity or mental incapacity or any such reason) and 

• has enough funds to start the business and 

• does not need any Investor to start this business, then