What No One Tells You About One Person Company Registration!

Many inspiring individuals have dreamed of building their own business in India. In the old business registration type, there were only two choices: either form a company as a sole proprietorship or a more complex private limited company. However, for the ambitious individual entrepreneurs, the one person company registration proves to be the game-changer. This legal business structure was designed by the Companies Act, 2013. Now, you are eligible to utilize the benefits of legal control and the sole proprietorship. 

The rules and regulations of a one-person company are different, and they further come with hidden considerations that no one explains. In addition, it will be a little bitter to speak that most of the time, the advantages steal the spotlight. 

In this comprehensive guide, we will explore those hidden points about company registration online in India apart from its advantages. Let us explore the page to uncover what lies beneath the foundation of one one-person company in India.

Also Read: Why OPC Registration Adds Instant Trusts to Your Solo Business

What makes OPC registration the optimal selection for individuals?

Before moving to the hidden points of OPC, let’s explore why it has become the best choice for individual entrepreneurs. 

Limited Liability:  This is one of the biggest reasons to move for the OPC registration certificate. In a sole proprietorship, the business faces the issue of personal assets that can be at risk during financial disputes. However, registration for OPC shields the personal assets of a director. It means the assets like savings, a car, and other financial things won’t be affected by debts or legal issues. The online business registration, like a person’s company, separates the personal wealth from the company’s debts. 

Separate Legal Entity: Like Pvt Ltd and the LLP, the one-person company also acts as a “separate legal entity.” The company is distinct from its owners, which allows it to own assets and enter into contracts. 

Easy Management: The ownership of the one-person company is handled by only one owner/director. This is beneficial to make decisions fast and appropriately. For any new rule or implementation for business growth, there is no need to conduct a meeting for a lengthy discussion. 

Perpetual Succession: The existence of an OPC will not be affected if the original owner exits, dies, or wants to change ownership. The legal structure of the OPC registration certificate guarantees perpetual succession. Furthermore, the compulsory nominee system is incorporated within the regulations of a one-person company, which plays a crucial role in preserving a company’s legacy.

Easier Access to Funding: Unlike the unregistered companies, the bank and the financial institutions only offered the funds to registered companies, like an OPC. This is because the person-company framework is covered with a structured legal format that has transparent financial statements. 

Tax Benefits: The structured format of the OPC comes under the corporate tax rates, which are much better than the individual income tax rates. The company that is subject to the corporate tax grows fast. 

These significant advantages made the online business registration for an OPC one of the most popular choices for inspiring individual entrepreneurs. 

Also Read: 3 Easy Steps to Get Business Registration Online in India

What No One Tells You: The Hidden Realities of OPC Registration

In the previous sections, we have discussed the advantages of a person company that make it the op choice. Now, it’s time to discuss the hidden layers of the company registration online process in India for an OPC: 

1. Nominee in “One-Person Company”

• The Mandatory Nominee: During the OPC registration in India, the owner needs to appoint a nominee, which is compulsory. If something happens to the original owner or they decide to leave the company, the ownership will be taken over by the appointed nominee.

• The Nominee’s Role (and Limitations): When you are running the company, the nominee doesn’t have any power. It means the nominee cannot enter the company discussion and the process until the original owner dies or exits. Additionally, the nominee is not permitted to be associated with another one-person company.

• Changing the Nominee: In case of dispute with the nominee or for any other reason, you want to change the nominee’s name; it is not simple. To change your nominee, you need to complete several formal steps. The process involves the new nominee’s consent and filing specific applications.

2. Compliance under the Companies Act

Unlike the private limited company, the one-person company has fewer compliance requirements. However, it is still registered under the Companies Act, 2013, which requires the following:

• Compulsory Annual Filings: As a one-person company falls under the Companies Act, it is required to maintain the balance sheet and profit & loss reports. Overall, the company registration online in India, like OPC, needs to file annual financial statements and returns with the ROC. For these, the company often requires the help of a CA.

• Board Meetings: There is no need to hold a lengthy discussion meeting with several directors. However, the one-person company still needs to conduct the meetings at least two times in one year or a 90-day gap.

• Maintaining Records: The owner of the OPC is responsible for handling the multiple statutory registers and statements. Just like the other companies, you need to properly take the signatures of directors and members.

3. OPC growth structure

The legal framework of the one-person company is designed for small and medium-sized enterprises. But there are also boundaries created for the OPC, which are

• Turnover and Paid-up Capital Limits: The rules of the Companies Act permit the OPC to convert into a public limited company or a private limited company. However, they can only convert the business type if their paid-up share capital exceeds Rs 50 lakh or the turnover for the past three years exceeds Rs 2 crore.

• Complex growth: To grow, a business needs to follow several steps, including the legal formalities, which are complex themselves. This leads to compliance requirements increasing, which is not as simple as it looks.

• Limited Fundraising: As the OPC is operated by only a single member or shareholder, this decreases the ability to raise funds. The members struggle to receive funds from angel investors and venture capitalists.

4. Business Activities Restrictions 

The OPC cannot convert into a non-profit.

• No Section 8 Companies: The one-person company is restricted from converting into a Section 8 company because it is designed for growth purposes, while a non-profit company works for charitable purposes.

• No Non-Banking Financial Activities: The non-banking financial operations cannot be carried out by the OPC. It means the one-person company cannot engage in securities or other companies.

Also Read: One Person Company Online Registration | Everyone Need to Know

Final Words | One-Person Company Registration in India

Before starting the OPC registration venture in India, one must study the unspoken realities. These hidden realities often help to take an informed and correct step, which can prove beneficial. For sustainable and successful growth, understand the advantages with limitations. Meanwhile, for your one-person company formation, the new company registration online guidance and support can be the best choice. Connect with us now for your individual entrepreneurship startup. 

Frequently Asked Questions

1. How much time does it take for company registration for an OPC?

Ans. For the one-person company registration in India, the registration process takes 10-15 days.

2. What are the major documents for OPC? 

Ans. You need to prepare:

• Identity proof like a PAN card, Aadhaar card, passport, or driving license.
• Address proof involves an electricity bill, a rent agreement, or a bank statement.
• Nominee consent in Form INC-3
• Proof of registered office and other major certificates.

3. Who can form the OPC?

Ans. The natural individual who must be a resident of India.

4. Does a one-person company hire employees?

Ans. Yes, under the Companies Act, the “OPC” is eligible to hire employees. 

5. What is the minimum authorized capital required for a person company?

Ans. Rs 1 lakh is necessary as the minimum authorized capital for OPC registration in India.