One Person Company is an uncommon format in India, where a single entrepreneur can avail himself the facility of treating the business under a corporate structure without much loss in control over the business. It was added as part of the Companies Act of 2013 and aimed to close the gap between a sole proprietorship and a private limited company. Before commencing with the One Person Company Registration, one needs to learn prerequisites and rules that would aid in the smooth facilitation of registration. Here are eight critical rules that you must know:
- Eligible Person for OPC Registration
There have been conditions set, according to which a person is eligible to apply for One Person Company by way of registration in India. An Indian citizen and a resident of India is supposed to stay in India at least for 182 days in a previous calendar year before registering as a one-person company. Membership minimum and maximum will also have to be observed since anybody can register just one OPC at a time. Thus, an individual will be able to avail the benefits from this business structure only.
- The Nominee should be named
A very important aspect of OPC is that he will have to name a nominee. While forming an OPC, the single owner is supposed to appoint a nominee who shall take over on behalf of the sole owner in case of death or incapacity. Nomination has to be done through form INC-3, seeking the acceptance of the nominee by the required formal approval and recording. The nominee is also required to be an Indian citizen and resident, which relates to the concept of continuity of operation in such unforeseen circumstances.
- Business Name Selection
The name of the OPC must comply with the Companies (Incorporation Rules) 2014. The chosen name should be unique, indicative of the company’s activities, and must include the words “OPC Private Limited” at the end. Careful selection of the name helps avoid rejection during the registration process and entrepreneurs are advised to perform a thorough name search on the MCA portal to ensure availability.
- Digital Signature Certificate (DSC) for Potential Director
This is the first step towards getting the Digital Signature Certificate (DSC), which is to sign important documents concerning the incorporation form and MOA/AOA. A DSC must be obtained from a certifying authority for the sole director of the OPC. This online tool ensures that the whole process of registration takes place in an efficient, secure, and paperless manner.
- Proof of Registered Office
The OPC must have a registered office address, which serves as its official communication point. Proof of the registered office which can be a utility bill, rent agreement, or ownership document must be submitted at the time of registration. The address will be used for all future correspondence with government officials and other official communications, making it a critical requirement.
- Limited Liability Protection
In savouring an OPC among its benefits, limited liability protection is one of the excellent advantages it can boast. Unlike a sole proprietorship, which puts all the owner’s assets at risk, liability for an OPC owner would only extend up to his or her share in the company. Thus, entrepreneurs would be safe from personal asset loss as regards their business debts and legal obligations, much to their peace of mind. This business setup proves to be very suitable for risk-takers in their endeavours in business.
- Compliance and yearly Reporting
Once registered, the OPC becomes subject to annual compliance requirements prescribed by the Ministry of Corporate Affairs (MCA), which include the filing of annual returns, income tax returns, and financial statements. Besides, it will keep statutory registers and books of accounts. Fines are inevitable with non-compliance; thus, the allocation of resources and seeking professional assistance to fulfil such obligations is important for the smooth running of the OPC.
- Based on Conversion Rules
OPCs come with explicit rules of conversion that must be known by every entrepreneur. When the paid-up capital of the company crosses ₹50 lakhs or annual turnover exceeds ₹2 crores, then converting the OPC into a private or public limited company becomes compulsory. Entrepreneurs should, therefore, keep a close eye on their financial growth to ensure early compliance with these conversion provisions. Preparing in advance for this conversion may prevent operational interruptions and legal bottlenecks.
Registration of a One Person Company in India is a suitable option for those sole entrepreneurs who want to avail an element of the corporate entity but have full control of the business. Platforms like registerkaro can simplify the process, ensuring a hassle-free experience for entrepreneurs. Understanding the eligibility requirements, the nominee requirements, and the compliance requirements will enable you to navigate the whole OPC registration process easily. With good groundwork, the company will be able to create a strong foundation for the business and take advantage of the benefits of the OPC structure.
