one person company

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The concept of One Person Company (OPC) as a new business form is introduced by the Companies Act, 2013. One Person Company is for individuals to carry on business with limited liability. Key features of this new concept are as under.

This form of business entity is a Private Limited (OPC) having only one member

This is one of the best form of business entity for small businesses

Paid up share capital of OPC should not exceed 0.5 Crore and turnover should not exceeds 2 Crores

Memorandum of OPC is required to provide details of nominee who shall become member of the company in case of death or incapacity to act as sole member

The member of OPC shall be deemed to be first Director of the OPC at the time of incorporation until the Director is duly appointed by the member

OPC can not be incorporated having charitable objects like environment protection, education, research, social welfare, etc. or with NBFC activities including investment in Securities in body corporate

There are basically three types of Companies

Public Limited Company

  • Any company which is not a Private Company and has a minimum paid up share capital of Rs.5 Lakhs.
  • Seven Members and Three Directors are required to form a public limited company.
  • A Public Limited company can either use Limited or Public Limited after its name.
  • Every Private company who is a subsidiary of a public company is also a Public Limited Company.

Private Limited Company

  • Any company having minimum paid up capital of Rs. 1 Lakh and is not a subsidiary of any Public Limited Company.
  • Two Directors and Two or more members can form a Private Limited Company.
  • Such companies do not have to comply with various provisions as that in a public limited company.
  • Such companies can have a maximum of 200 members and also cannot accept public deposits nor can invite public to subscribe its shares or debentures.

One Person Company(OPC)

  • The Company Act 2014, giving an opportunity to entrepreneurs via introducing the concept of OPC where single person can make his own company.
  • Atleast One Person and maximum 15 (fifteen) directors can be there in an OPC.
  • In case of One Director he has to appoint his nominee and mention the name of the nominee so appointed in the MOA & AOA of the company.
  • Every One Person Company falls under the purview of Private Limited Company but shall affix (OPC) in brackets after its registered name.
The concept of One Person Company is best suited to small companies, so there are certain relaxations given like:


Nomination facility in order to reduce the hardship caused in transferring the shares to the legal heir after members death or otherwise

No need to hold AGM (Annual General Meeting)

Financial Statements can be signed by only one Director

Annual return can be signed by CS or one Director if there is no CS.

Cash flow statements not required

Board meetings of OPC is required to be held atleast once in a half year and the gap between 2 meetings should not be less than 90 days.

Provisions of Board meetings, quorum and interested director doesn't apply to OPC.

where there is only one director on the Board of Director of a One person Company, any business which is required to be transacted at the meeting of the Board of Directors of a company, it shall be sufficient if, in case of such One Person Company, the resolution by such director is entered in the minutes book required to be maintained under section 118 and signed and dated by such director and such date shall be deemed to be the date of the meeting of the Board of Directors for all the purposes .

Drawbacks +

Costly to Form and Run:In comparison with other business forms, it is costly to incorporate and run a Company. Lot of compliances is required to be carried every year and therefore the cost of running is also high in comparison to other forms. Moreover heavy fines and penalties has been prescribed for the noncompliance.

Regulated form of Business:Company is highly regulated form of business , as lot of compliances like maintenance of various registers , holding of meetings are required to done each year and for undertaking various activities or decision , it is necessary to obtain the permission of specified number of shareholders and in some , of regulatory authorities also. The Companies Act 1956 also prescribes various provisions how the company will be managed and run.

Audit and Financial Disclosures:: It is necessary for all the companies to get its accounts audited annually and to prepare its balance sheet and profit and loss account in accordance with the prescribed guidelines. Lot of information as to the financial condition of the business is required to be disclosed and moreover, all such documents are available for public inspection, therefore it is not possible to maintain financial secrecy of the business.

Lack of Control: In case of companies, the ownership and management is divorced, in order words, it is not necessary the people owning the company are also managing it. The Company is managed by Directors, which are appointed by the shareholders. The Directors are responsible for running and managing the company and taking key business decisions and shareholders don't have any direct control over the company and therefore they are not much aware of whats happening in the company.

Long Closing Proceedings:: It is generally not easy to close the company as compared to other forms of business, the procedure to close is long and involves compliance of various formalities, at times it takes 1-2 years to completely wind-up the company. Moreover in certain cases, it is necessary to take the permission of the High Court to close the Company

The Basic Requirements to form OPC are;

Member and Nominee of OPC should be a natural person, citizen of India and Resident in India*

Registered Office in India,

Appointment of nominee (Nominee being a natural person, citizen of India and Resident in India*) in case of cessation of sole member in the event of death or his incapacity of contract

Share capital not more than 50 Lakh INR.

However, it is to be noted that no person (member/Nominee) shall be eligible to incorporate more than 1(One) OPC.
In case of cessation of sole member “X”, the new member “Y” (earlier nominee) shall nominate “Z” within 15 days of becoming member in OPC. OPC is required to intimate the same to the Registrar in prescribed form.

* Resident in India means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.
Company whether Indian or foreign is liable to taxation, under the Income Tax Act, 1961.

A Company means

Any Indian company, or

Any corporate body, incorporated by or under the laws of a country outside India

Classification of companies for the purpose of taxation

Domestic Company

It means an Indian company (i.e. a company formed and registered under the Companies Act, 1956) or any other company which, in respect of its income liable to tax, under the Income Tax Act, has made the prescribed arrangement for declaration and payments within India, of the dividends payable out of such income. A domestic company may be a public company or a private company.

Foreign Company

It means a company whose control and management are situated wholly outside India, and which has not made the prescribed arrangements for declaration and payment of dividends within India.

Provision relating to taxation of a Company

Indian companies are taxable in India on their worldwide income, irrespective of its source and origin.

Foreign companies are taxed only on income which arises from operations carried out in India or, in certain cases, on income which is deemed to have arisen in India. It includes royalty, fees for technical services, interest, gains from sale of capital assets situated in India (including gains from sale of shares in an Indian company) and dividends from Indian companies.

A Company is said to be resident in India during any relevant previous year if:-

i. It is an Indian Company; or
ii. The control and management of its affairs is situated wholly in India.

Tax Rates

Domestic Company

Income-tax: 30% of total income.
Surcharge: 5% of such income tax provided that the total income exceeds Rs. 1 crore
Education Cess: 3% of the total of Income-tax and Surcharge.

Company other than a Domestic Company

Income-tax: 50% and 40%
Surcharge: 2% of such income tax provided that the total income exceeds Rs. 1 crore.
Education Cess: 3% of the total of Income-tax and Surcharge.

Dividend Distribution Tax (DDT)

Under the Income Tax Act, any amount declared, distributed or paid by a domestic company by way of dividend shall be chargeable to dividend tax. Tax on distributed profit is in addition to income tax chargeable in respect of total income. It is applicable whether the dividend is interim or otherwise.

Dividend Distribution Tax: 15%
Surcharge: 5%
Education Cess: 3%

Tax Computation

The tax liability of the Company on its taxable income is computed in the following manner:

Ascertain the 'total income' of the company by aggregating incomes falling under following four heads:-

Income from House Property, whether residential or commercial, let-out or self-occupied. However, house property used for purpose of company's business does not fall under this head.

Profits and Gains of Business or Profession.

Capital Gains.

Income from other sources including interest on securities, winnings from lotteries, races, puzzles, etc. Also, income of other persons may be included in the income of the company. But, income under the head 'Salary' is not included under company.

To the total income so obtained, 'current and brought forward losses' should be adjusted for set off in subsequent assessment years to arrive at the gross total Income. The total income so computed is the 'gross total income'.

From the gross total income, prescribed 'deductions' under Chapter VI A of the Income Tax Act 1961 shall be made to get the 'net income'. Generally, all expenses incurred for business purposes are deductible from taxable income, given that the expenses must be wholly and exclusively incurred for business purposes and also that the expenses must be incurred/paid during the previous year and supported by relevant papers and records. But expenses of personal or of capital nature are not deductible. Capital expenditure are deductible only through depreciation or as the basis of property in determining capital gains/losses. But no deduction shall be allowed in respect of any expenditure incurred in relation to income which does not form part of total income.

Tax liability is computed on the 'net income' that is chargeable to tax. It is done either on accrual basis or on receipt basis (whichever is earlier). However if an income is taxed on accrual basis, it shall not be taxed on receipt basis.

From the tax so computed, tax rebates or tax credit are deducted.

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General OPC+

Who can form OPC?
What does Resident in India means?
What documents are required to form OPC in India?
Is it required to have a valid Registered Office Proof to register OPC?
What can we furnish as Registered Office Address Proof?
Can I change the Registered Office of One Person Company?
What documents are required to furnish to the Registrar for change of Registered Office of One Person Company?
Who will become member in case of Death or incapacity to act as Member?
Is it necessary that the member of OPC be Director of OPC?
What is the procedure to form OPC?
Can OPC be wound up?
Can an existing Private Limited Company registered under the Companies Act, 1956 or any previous company law be converted into One Person Company?
What is the threshold limit for conversion of OPC into Company?
What if the Sole member ceases?
What is the penalty for non compliance of provisions relating to OPC?
Is OPC required to prepare and file Annual return?
Who shall sign the Annual Return of OPC?
What is the minimum and maximum number of Directors for One Person Company?
How many Board Meetings are to be conducted in One Person Company?
What is the requirement in relation to holding of Annual General Meeting (AGM)?
What are the provisions in regard to Contracts by One Person Company?
How is an OPC different from Sole Proprietorship?

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