MEANING:
A One Person Company (OPC) is a type of private company in India that allows a single individual to start a business while enjoying the benefits of a corporate entity. It requires only one member and one director, provides limited liability protection to the owner and can later be converted into a private or public limited company as the business grows.
Who is eligible for OPC?
An OPC (One Person Company) can be formed by a natural person who is an Indian citizen and resident of India. The following are the eligibility criteria to form an OPC:
- As per Companies (Incorporation) 2nd Amendment Rules 2021, only a natural person who is an Indian citizen whether resident in India or otherwise shall be eligible to incorporate a One Person Company. Note: Resident in India” means a person who has stayed in India for a period of not less than one hundred and twenty days during the immediately preceding financial year.
- Only a natural person can form an OPC, not any legal entity or company.
- The person forming the OPC must be at least 18 years old.
- Only one person can be the shareholder and director of an OPC.
- The person forming the OPC must not be a member or nominee of more than one OPC.
- The person forming the OPC must not be disqualified under the Companies Act 2013.
Additionally, certain businesses cannot be formed as OPC, such as non-profit organizations, banking or financial institutions, and companies engaged in activities like investment in securities.
Other Conditions to Form OPC
As mentioned above, Only a natural person who is an Indian citizen and resident of India can form an OPC. Non-residents and foreign nationals are not eligible to form an OPC.
- A person can form only one OPC at a time. If a person already has an OPC, they cannot incorporate another OPC.
- The nominee of the OPC must be an Indian citizen and resident of India. The nominee is appointed by the person forming the OPC and will become the owner of the OPC in case the single person becomes incapacitated or dies.
- An OPC cannot be formed for non-profit activities, and it cannot carry out any unlawful activities.
- The paid-up share capital of an OPC must not exceed Rs. Fifty lakhs and its annual turnover must not exceed Rs. 2 Crores
ADVANTAGES:
- Legal Status and Limited Liability – OPC is a separate legal entity, providing limited liability protection to its owner. Personal assets are safeguarded against business debts and obligations.
- Enhanced Credibility – Compared to sole proprietorships, an OPC enjoys greater credibility with banks, investors, and clients, making it easier to conduct business.
- Simplified Compliance – OPCs have less stringent compliance requirements than private or public companies, e.g., no need to hold annual general meetings.
- Tax Flexibility and Savings – OPCs are taxed at the corporate tax rate, and certain business expenses are deductible, providing potential tax benefits over sole proprietorships.
- Separate Legal Property – Being a separate legal entity, an OPC can own property, enter contracts, and conduct business in its own name, offering legal protection and operational independence.