The Companies Act, 2013 introduced the concept of a One Person Company (OPC), allowing a single individual to establish and manage a company. An OPC combines the advantages of a company—such as limited liability, perpetual succession, and a separate legal entity—with the simplicity of a sole proprietorship.
Before the Companies Act, 2013, forming a company required at least two directors and two members for a private company, and three directors and seven members for a public company. This meant that a single person could only start a business as a sole proprietorship.
As per Section 2(62) of the Companies Act, 2013, an OPC can be formed with just one director and one member, who can be the same individual. The compliance requirements for an OPC are simpler compared to a private company. This structure enables both resident Indians and NRIs to incorporate their business while enjoying the benefits of a company along with the flexibility of a sole proprietorship.
Advantages of a One Person Company (OPC)
1. Separate Legal Status
An OPC is recognized as a separate legal entity from its member. This protects the individual who incorporates the company, as their liability is limited to their shares. Creditors can only claim the company’s assets, not the personal assets of the member or director.
2. Easy Access to Funds
Being a private company, an OPC can raise funds more easily through venture capital, angel investors, or incubators. Banks and financial institutions also prefer granting loans to companies rather than sole proprietorships, making financing simpler.
3. Fewer Compliance Requirements
The Companies Act, 2013 provides certain compliance exemptions for OPCs. For instance, preparing a cash flow statement is not mandatory, and the annual accounts and returns need only be signed by the director, not a company secretary.
4. Simple Incorporation Process
Incorporating an OPC is straightforward as it requires only one member and a nominee. The member can also act as the director. The minimum authorized capital is ₹1 lakh, with no minimum paid-up capital requirement, making OPC formation easier compared to other types of companies.
5. Easy Management
An OPC is simple to manage since a single individual runs it. Decision-making is quick with no internal conflicts, and ordinary or special resolutions can be passed by the sole member and recorded in the minutes book.
6. Perpetual Succession
Despite having only one member, an OPC enjoys perpetual succession. The member appoints a nominee during incorporation, who automatically takes over management in the event of the member’s death, ensuring business continuity.
Disadvantages of a One Person Company (OPC)
1. Suitable Only for Small Businesses
An OPC is primarily designed for small business structures. Since it can have only one member at any time, additional members or shareholders cannot be added to raise capital. As a result, business expansion may be limited, and the structure may not support large-scale growth.
2. Restriction on Business Activities
OPCs are restricted from carrying out certain activities, such as non-banking financial investment operations, including investing in securities of other companies. Additionally, an OPC cannot be converted into a Section 8 company (a company with charitable objectives) under the Companies Act, 2013.
3. Ownership and Management Overlap
In an OPC, the sole member often acts as the director, leading to no clear separation between ownership and management. This concentration of control allows the member to make and approve all decisions, which may increase the risk of unethical practices and reduce checks and balances within the company.
One Person Company (OPC) Registration Process in India
Step 1: Obtain Digital Signature Certificate (DSC)
The first step is to acquire the Digital Signature Certificate (DSC) for the proposed director. The following documents are required:
- Proof of address
- Aadhaar card
- PAN card
- Passport-sized photograph
- Email ID
- Phone number
Step 2: Apply for Director Identification Number (DIN)
After obtaining the DSC, the next step is to apply for the Director Identification Number (DIN) of the proposed director through the SPICe+ form, along with the director’s name and address proof.
Note: Form DIR-3 is now applicable only for existing companies. Since January 2018, DIN can be applied directly through SPICe+ for up to three directors.
Step 3: Name Approval
Choose a name for the OPC in the format: “ABC (OPC) Private Limited”. The preferred name can be submitted through the SPICe+ application along with the rationale for choosing it.
- If the name is rejected, another application can be submitted with a different name.
- Once approved by the MCA, the process moves to document submission.
Step 4: Prepare Required Documents
The following documents must be prepared and submitted to the Registrar of Companies (ROC):
- Memorandum of Association (MoA): Outlines the business objectives.
- Articles of Association (AoA): Defines the company’s internal rules and regulations.
- Nominee Appointment: Since there is only one member, a nominee must be appointed in Form INC-3, along with their consent, PAN card, and Aadhaar card.
- Registered Office Proof: Includes ownership proof and NOC from the property owner.
- Declarations and Consents: Form INC-9 (declaration by director) and Form DIR-2 (consent of director).
- Professional Declaration: Certifying that all legal compliances have been met.
Step 5: Filing Forms with MCA
Attach all documents to SPICe+, SPICe-MOA, and SPICe-AOA forms, along with the DSCs of the director and professional, and submit them online to the MCA portal.
- PAN and TAN numbers are automatically generated during incorporation. No separate application is needed.
Step 6: Certificate of Incorporation
After verification, the Registrar of Companies (ROC) issues the Certificate of Incorporation, allowing you to commence business operations.
OPC Registration Checklist
- Only one member allowed.
- Nominee must be appointed before incorporation.
- Nominee’s consent must be obtained in Form INC-3.
- Company name must comply with Companies (Incorporation) Rules, 2014.
- Minimum authorized capital of ₹1 lakh.
- DSC of the proposed director.
- Proof of registered office.
Timelines for OPC Registration
- DSC and DIN can be obtained in 1 day.
- Certificate of Incorporation is issued in 3–5 days.
- Overall process takes approximately 10 days, depending on departmental approvals and responses.
Frequently Asked Questions (FAQs) – One Person Company (OPC)
Q1. Who is eligible to be a member of an OPC?
A: Only a natural person who is an Indian citizen and resident in India can act as a member and nominee of an OPC. Here, a “resident in India” refers to a person who has stayed in India for at least 182 days during the immediately preceding financial year.
Q2. Can a person be a member of more than one OPC?
A: No. A person can hold membership in only one OPC at a time.
Q3. Is there any tax advantage to forming an OPC?
A: There is no special tax advantage for an OPC compared to other company types. The corporate tax rate is 30%, and other provisions like Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) apply similarly to OPCs and other companies.
Q4. Are there any thresholds for mandatory conversion of an OPC into a private or public company?
A: No. The Companies (Incorporation) Second Amendment Rules, 2021 removed the mandatory conversion requirement. OPCs no longer need to convert into private or public companies upon reaching specific paid-up capital or turnover limits.
Q5. What are the mandatory compliance requirements for an OPC?
A: An OPC must observe the following key compliances:
- Hold at least one Board Meeting in each half of the calendar year, with a minimum gap of 90 days between meetings.
- Maintain proper books of accounts.
- Conduct a statutory audit of financial statements (if applicable).
- File Income Tax Returns annually before 30th September.
- Submit Financial Statements in Form AOC-4 and ROC Annual Return in Form MGT-7.
Q6. Who is not eligible to form an OPC?
A: The following individuals cannot form an OPC:
- Minors
- Foreign citizens
- Non-residents of India
- Persons incapacitated by any contract or law
Q7. How can an OPC be converted into a Private Limited Company?
A: An OPC can voluntarily convert into a private limited company by:
- Passing a special resolution to increase the minimum number of members and directors to two.
- Obtaining a No Objection Certificate (NOC) from all creditors in writing.
Once these steps are completed, the OPC can be registered as a private limited company.
Q8. Can an OPC convert into a Public Limited Company?
A: Yes, an OPC can also convert into a public limited company, but this is less common. The process requires compliance with the Companies Act, 2013, including an increase in the number of members, directors, and adherence to statutory filings.
Q9. Is it mandatory for an OPC to have a Board of Directors?
A: An OPC is managed by a single director, who also acts as the member. A formal board meeting is required only to comply with statutory regulations.
Q10. Can an OPC have multiple business activities?
A: Yes, an OPC can operate multiple business activities, but they must be reflected in the Company’s MOA (Memorandum of Association) and statutory filings.
Q11. How long does it take to register an OPC in India?
A: OPC registration typically takes 7–10 business days, provided all documents are complete, including Digital Signature Certificate (DSC), Director Identification Number (DIN), and proof of address.
Q12. Can a foreign resident invest in an OPC?
A: No, only Indian residents can form an OPC. However, foreign investment in the OPC’s business operations may be allowed subject to FDI regulations.
