Entrepreneurship has become a popular career choice in recent times, with many individuals aspiring to start their own businesses. However, the thought of setting up a company with multiple directors and shareholders can be daunting. One Person Company (OPC) is a business structure that addresses this issue and provides a flexible and efficient solution for entrepreneurs. In this blog, we will discuss what OPC is, how it works, and its benefits for entrepreneurs.
What is One Person Company?
One Person Company is a type of company structure that was introduced in India in 2013 under the Companies Act, 2013. OPC company registration in India involves choosing a name, obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN), filing Memorandum of Association (MOA) and Articles of Association (AOA), and obtaining a Certificate of Incorporation (COI) from Registrar of Companies (ROC). As the name suggests, OPC can be formed with just one person as a member or shareholder. It provides a separate legal entity to the business, limiting the liability of the owner. OPC is a type of company structure where a single person can form a company as both director and shareholder. It provides a separate legal entity to the business, limiting the liability of the owner.
How Does One Person Company Work?
Setting up a One Person Company (OPC) is a relatively simple process that involves the following steps:
- Choose a Name for the Company
The first step in setting up an OPC is to choose a name for the company that complies with the guidelines provided by the Ministry of Corporate Affairs (MCA).
- Obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN)
The next step is to obtain a DSC and DIN for the sole member of the OPC. A DSC is required for filing electronic documents with the MCA, while a DIN is a unique identification number for directors.
- Draft and File the Memorandum of Association (MOA) and Articles of Association (AOA)
The MOA and AOA outline the objectives, rules, and regulations of the OPC. They must be drafted and filed with the Registrar of Companies (ROC) along with other necessary documents.
- Obtain a Certificate of Incorporation (COI)
Once the documents are filed, the ROC will verify and approve the application, after which a COI will be issued. This marks the official registration of the OPC.
- Open a Bank Account and Obtain Necessary Registrations
The OPC must open a bank account in the company’s name and obtain other registrations such as PAN, GST, and TAN, as per the business requirements.
Once the OPC is set up, the owner can function as both the director and shareholder. The company is required to maintain proper records and file annual returns with the ROC.
What are the Benefits of One Person Company for Entrepreneurs?
One Person Company offers several benefits to entrepreneurs, including:
- Limited liability
OPC provides a separate legal entity to the business, which limits the liability of the owner. In case of any financial or legal issues, the owner’s personal assets remain protected.
- Sole ownership
Unlike traditional companies that require multiple directors and shareholders, OPC can be formed with just one person as a member or shareholder. This gives entrepreneurs the flexibility to operate and control their business as they see fit.
- Tax benefits
OPCs are taxed as per the corporate tax rate, which is lower than the individual tax rate. This results in lower tax liability for the owner.
- Better access to funding
OPCs are considered more reliable and creditworthy than sole proprietorships, which makes it easier for them to access funding from banks and other financial institutions.
- Ease of compliance
OPCs have fewer compliance requirements compared to traditional companies. For instance, they are exempt from holding annual general meetings, and only one director is required to sign the financial statements.
- Professional image
OPCs give entrepreneurs a more professional image, which can help them attract more clients and customers.
In conclusion, One Person Company is a flexible and efficient business structure that offers several benefits to entrepreneurs. With limited liability, sole ownership, tax benefits, better access to funding, ease of compliance, and a professional image, OPC can be an excellent choice for those looking to start their own business. If you are an entrepreneur looking to set up a company, we highly recommend exploring the option of One Person Company.