A-Z of Starting a One Person Company in India

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For many individuals, setting up a business stands out as an exciting option. It will provide you with creative freedom and the chance of becoming your own boss. But all these things come with many challenges.

It comes with the government paperwork, which is required to register the business and make everything official. In this content, you will understand how you can efficiently complete the Open Person Company or OPC company registration, its features, and many more.

One Person Company: A Brief Explanation

Now, before you jump to the main section, it’s important to have some knowledge about OPC. The One Person Company is a registration option introduced by the Indian Government.

It was issued under the One Person Companies Act 2013, where small businesses can easily register their brands. That way, they can run their business legally on Indian soil. Before, an individual didn’t have the power to set up their own business.

If a single person wants to run their own company, they have to opt for the “sole proprietorship” option. They also need 2 members and 2 directors to establish a business. Private firms must have 2 members and 2 directors, and public firms should have 7 members and 3 directors. In the past, a single person setting up the company was not possible.

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However, under Section 2(62) of the Company Act 2013, it is feasible to set up an enterprise with just 1 associate and 1 director. In this situation, the same individual can become a member and director.

When setting up your one person company, the compliance requirements will be a lot lesser compared to private companies. However, when establishing an OPC, you have to be an Indian citizen or an NRI who can easily incorporate their business, which contains the features of a firm and the advantages of a sole proprietorship.

Launch Your Own One Person Company: How to Establish It?

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OPCs in India have been growing at a quick pace,  with a rise of 20% since 2014. As of 2024, the nation has 34,446 OPCs, with 7600 of which were set up in 2023. However, if you’re preparing to set up a one-person company, you must observe the pointers noted below!

Obtain the Digital Signature Certificate

It’s crucial to apply for the  DSC (Digital Signature Certificate) for the enterprise's suggested shareholder. To acquire this credential, you must deliver the following papers:

• Contact Number
• PAN Card
• Email Address
• Address Proof
• Photograph
• Aadhaar Card

Once you get DSC, it will become easier to sign all kinds of important documents electronically.

Apply for the Director Identification Number

After acquiring the DSC, you must apply for a DIN (Director Identification Number) with the address proof and name of the suggested director. This is a tag number that is administered by the MCA (Ministry of Corporate Affairs) to all the leaders of a firm.

Once you apply for the DIN number, it is authorized by the Ministry of Corporate Affairs to finish the OPC registration procedure on time.

Prepare the Required Documents
 

To complete the registration of a One Person Company (OPC), the following documents must be prepared:

• NOC from the owner of the registered office.
• PAN Card of the shareholder and director.
• Address proof of the shareholder and director.
• A rental agreement for the registered office (if the property is rented).
• Utility bills (not older than 2 months).

Ensure all documents are thoroughly checked before submission, and attach any that may be missing.
 

Reserve the Company Name

At this stage, you need to secure a unique name for your company. To do this, apply for name registration through the Ministry of Corporate Affairs website. Complete the SPICe+ (Part A) Form and ensure that the chosen name is distinctive and not identical or similar to any existing property or entity.
 

Prepare the AOA and MOA

An entity's AOA (Articles of Association) and MOA (Memorandum of Association) must be correctly prepared and submitted to the ROC (Registrar of Companies). The MOA summarises a business's aims, whereas the AOA delivers the company's inner standards and regulations.

Filling the Forms with the Ministry of Corporate Affairs

The documents that you provided will be attached to the SPICe – AOA, SPICe+ Form, and SPICe – MOA with the proposed director’s Digital Signature Certificate. After that, you must upload it on the MCA’s platform to get it approved.

The TAN and PAN Numbers will be automatically generated during the business’s incorporation. You don’t have to file for applications separately to get the TAN and PAN Numbers.

Issuing the Certificate of Incorporation

During the verification work, the ROC will issue the Certificate of Incorporation. After that, you can commence your business effectively.
 

The Features of One Person Company: What Are They?

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Incorporating your own OPC means getting all the unique features of one person company that it has in-store. Here are some of them:

• Authorized Capital: You just need a capital of INR 1,00,000 to incorporate your own OPC. For this reason, this business model is highly advantageous to all small/new entrepreneurs who want to run a company independently.
• Less Compliance: Open-person companies have fewer compliance requirements, according to the Companies Act of 2013. It’s much less than the public and private organizations. Here is a small illustration: “Since an OPC only has 1 director, it doesn’t have to hold the annual board meeting or a general meeting, unlike the public and private firms.”
• Succession: This is one of the important features of one person company. During the OPC incorporation, the sole member of the company must appoint a nominee. It’s because when the sole member cannot run the business because of an unwanted situation or death, the nominee will have full authority to continue the business.
• Separate Identity: Open-person companies have their own identity even when they have just 1 shareholder. Possessing a separate identity means that the company’s owner can build a brand value, and consumers will surely find this more trustworthy and reliable.
• Limited Liability: A member of an open-person business will not be personally held accountable. This is limited to the extent of the share’s value in his/her business. It will not affect the personal assets of all the members, and they can explore more opportunities and take risks.

Instant Decision Making: In a one person company, the shareholder is the only decision-maker and sole authority. It will become easier for him/her to make immediate decisions for the business. As the legal owner of an OPC, you are not obligated to depend on others for permissions and decisions. This allows you to perform whatever actions you desire on the organization's behalf.

One Person Company vs Sole Proprietorship: The Distinction

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Many people believe that a one-person company and a sole proprietorship are identical. But honestly, they’re not. There is a massive difference between and through this one person company vs sole proprietorship table, and you will get a clear idea of them:
 

Drawbacks of the One-Person Company

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Just like all the other things, completing the one person company registration work will provide you with some drawbacks, which you must stay well aware of:

• High Turnovers Are Not Permitted: One-person companies that maintain a turnover of over INR 2 Crores will instantly transform into a “private firm”. This clearly shows that OPC is not ideal for businesses that have massive growth potential and will certainly cross the needed turnover.
• Tax Rate: As an owner of an OPC company, you will not receive any tax-related advantages. All OPCs are viewed as a “private organization” under the Income Tax Act of 1961. These businesses are taxed about 30% of their overall income.
• Conversion Restrictions: It’s not possible to voluntarily transform an OPC into a private business before 2 years of the company’s incorporation.
• Employees Will Less Incentives: The ESOP (Employee Stock Option Scheme) is a highly beneficial option for individuals working in any company. However, this particular scheme is not permitted under the One Person Company. It’s because there are some restrictions when it comes to transferring the shares. This might be a huge setback for the employees because they wish to be appreciated for their dedication and hard work.

One-Person Company: Exemptions and Relaxations

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Some certain exemptions and relaxations are provided to owners of open-person companies under the one person companies act 2013:

• One-person companies don’t have to conduct any AGM (Annual General Meeting)
• One Person Companies can hold only two meetings. One should be conducted during the first 6 months, and the second one must be conducted in the last 6 months. But make sure there is a 90-day period between the two board meetings.
• When an OPC has just one director, the company doesn’t have to comply with the “Secretarial Standard – 1 (Board of Directors Meeting). The Secretarial Standard – 2 (Normal Meetings) is also not needed for a one-person company.
• OPCs don’t have to appoint any independent directors.
• You cannot appoint a minor as the nominee or member of your One Person Company.
• All the board reports and the monetary statements should be signed by just one director.
• OPCs don’t have to add the “Cash Flow Statement” to their monetary statements.
• One OPC can have approximately 15 directors under its belt.
• The nominee of an OPC is not qualified to become the nominee for another OPC.
• The firm’s secretary should sign Form MGT A, which is an OPC’s annual return. If an enterprise doesn’t want to assign a secretary or doesn’t have one, the company’s leader can sign the annual return. This means there is no need for a practicing secretary to sign it.

Conclusion

Open Person Company is a highly beneficial option for all small businesses. With the help of this legal option, you will have complete control over the company and get to operate it through a registered and lawful business entity.

However, the suitability of OPC will depend heavily on the scale and nature of your business operations. So, you must check the one person company registration charges and consider all the flaws and usefulness right before you pick this type of business model.

Apart from that, it’s also important to take care of the legal and compliance-related work if you wish to run a successful OPC. For that, you can call in the experts from Filing Buddy to handle the job for you. They are well equipped to take care of not just your compliance needs but also handle patents, business incorporation, and taxation work seamlessly. 

Frequently Asked Question

1. Is GST important for a One-Person Company?

In short, yes, it is. Just like for all the other businesses in India, is the Goods and Services Tax compulsory for a One Person Company?

2. How much is the enrollment fee for the One Person Company?

The one person company registration fee varies between INR 7,000 to INR 30,000. But the fee will rely heavily on the Indian state you belong to.

3. To start an OPC, how much capital do you need?

You will require a capital of INR 1,00,000 to start an OPC, and you don’t have to use that amount to fund your business.

4. What’s the age requirement for starting an OPC in India?

You have to be 18 years old to run a one-person company in the country, and you must be an Indian citizen.