One Person Company (OPC) is a simplest business form suited for solo founders. OPCs are private limited companies with single owner. But, OPC’s can have more than one directors. OPC registration process also requires you to nominate someone from your circle as a nominee. The nominee can take over the business, if the original shareholder becomes incapable to run the business.
OPCs gives you the flexibility of starting up without waiting for a cofounder and convert into to a private limited later stage. It has got all the features of a private limited company –limited liability, separate legal existence, perpetual succession, concept of shareholding etc.
Like in the case of any other business setup, after the OPC registration, you have to obtain an approval for your place of business (Shops & Commercial establishment registration), Goods and Services Tax registration (if your revenue cross INR 2 million) and Social Security registrations (if your employee headcount crosses the thresholds)
Now you can form an OPC through a process called ‘Simplified Performa for Incorporating Company Electronically’ (SPICe) in 3-5 days. The SPICe is a single window approval system wherein you will get all the regulatory approvals to kichstart the business in a single application.
OPC’s have to maintain its books of account, appoint statutory auditors, conduct statutory audits, and file returns for financials and operations every annum. Almost all the compliance requirements of private limited companies are applicable to OPCs except requirements on conducting Board – Shareholder meetings.
Since the failure rate of startups and insolvency problems faced by promoters of companies is slowing down India’s business expansion, government simplified the winding up the process for businesses and brought in a new insolvency code in place.
Simplified striking off process, let’s you wind up an OPC not in operation for a period of two years by filing an application – provided all the statutory and creditors liabilities are settled by the company.
The new insolvency regime also provides for early recognition of loss assets and their restructuring to avoid a huge loss to the shareholders.
Our engagement in the process starts with identifying if OPC is the best form of business for you. If yes, we will review your business requirements and identify the registrations and the legal documentation needed.
We can help you, register the company, get a permanent account number (PAN), tax deductions account number (TAN), set up a current account, draft various agreements and policies and put in place a process for accounting and compliance.
Ground work: We will require a 30 minutes meeting or call with founder to understand the main objects for forming an OPC, collection of documents and his specific requirements on the constitution of the Company.
This will followed with obtaining of Digital Signature Certificates (DSCs) for Directors and Shareholders of the proposed OPC. We will help the Directors to apply for Digital Identification Number (DIN) – an unique identification number issued to Directors by Ministry of Corporate Affairs.
Name Approval process: The name approval is going to be the most time consuming process if you do not have an unique name to your business. Registrar of companies may reject the names which are similar to existing name phonetically or in spelling. You may get a rejection if there are resembling trademarks or the name applied is generic in nature.
We recommend founders to do their homework on company names and come up with at least 3-6 significantly different and unique names for an easy approval.
Finalising Constitutional Documents: Memorandum of Association (main objects of company, capital - shareholding pattern are covered in MoA) and Articles of Association (bye laws for the operation of the business are covered in AoA). We can help you draft one custom Memorandum or Articles of association if the templates suggested by Companies Act isn’t fit for you.
OPC Registration: Filing signed MoA, AoA, updating registered office of the company and paying government fees and stamp duty is the third and last step in the process. After the Registrar of Companies (RoC) finds that you have complied with all norms, Certificate of Incorporation is sent via email.
Company PAN and TAN will be emailed by Income Tax department within couple of days of incorporation.
Registering a company is a beginning of a journey. Please keep in mind that OPC will require your regular attention and some focus areas you ought to be careful are:
Corporate tax: It is a form of direct tax on profits of an OPC. Corporate taxes on profits in India are 30%, but if the turnover of OPC does not exceed 5 crores tax rate is 29%. Profit making companies requires to pay advance corporate tax on a quarterly basis.
Exceptions: -Startups recognised by the central government can avail tax holidays in the initial years of setting up. Speak to our executives to know more about tax incentives for startups.
Good and Services Tax (GST): Any business dealing in purchase and sales of goods and services in India comes under purview of Indirect Taxation. You have to enrol for GST as and when you reaches the turnover thresholds.
Statutory Audit and maintenance of books of accounts is mandatory if you are running an OPC. You have to appoint a statutory auditor once you incorporate your OPC.
Annual reporting of financial position and operations of the company to Registrar of companies and Income Tax department is mandatory.