Although a One Person Company enables a single Individual to run a limited liability-protected corporate organization, an OPC does have some limitations. For example, each One Person Company (OPC) will appoint a nominee director in the Company’s MOA and AOA-who will become the OPC owner if the sole director is disabled. A One-Person Company must also be transformed into a Private Limited Company if it reaches an annual turnover of Rs.2 crores and, like all forms of companies, must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year. Hence, it is important that the Entrepreneur carefully consider the characteristics of a Person Company before incorporation.
Unlike a private limited company, there are certain restrictions associated with its incorporation into a one-person company. Before starting an OPC registration, it is necessary to understand the restrictions and to ensure that the promoter is qualified to register an OPC under the Companies Act.
- Only a natural person who is an Indian Citizen and resident in India can incorporate OPC.
- Resident in India means a person who had resided in India for a period not lesser than 182 days in the prior calendar year.
- Legal entities like Companies or LLP cannot incorporate an OPC.
- The minimum authorized capital is Rs 1,00,000.
- A nominee must be appointed by the promoter during incorporation.
- Businesses involved in financial activities cannot be incorporated as OPC.
- OPC must be converted to a private limited company when paid-up share capital exceeds Rs.50 lakhs or turnover crosses Rs.2 crores.
Therefore, an Indian citizen who has had his / her presence in India for at least 182 days during the immediately preceding calendar year may form a one-person company. A person can incorporate not more than one OPC. Ultimately, it’s prohibited for an OPC to have a minor as a member.
The process for incorporation of a One Person Company can be divided into four steps as under:
- Obtaining Digital Signature
- Obtaining Name Approval
- Incorporation Filing
- Commencement of Business