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Prior to the implementation of the Companies Act of 2013, only two people could form a company. The Companies Act of 2013 supports the formation of Person Companies (OPC) in India. It governs the registration and functioning of one person company in India. In comparison with a public company a private company should have at least two directors and two members however on the contrary, one person company doesn't need any group of people to be incorporated.
As per Section 262 of the Companies Act of 2013 and official registration of a one-person company in India is legal. Registering an OPC in India requires a single director and a single member representing the whole firm. This corporation type has very few compliance requirements in comparison with a private corporation.
The member grants the OPC a separate legal entity status. The sole person who incorporated the OPC is protected by its distinct legal status. The member is not personally liable for the company's loss; instead, his or her liability is limited to the value of the shares that he or she owns. Therefore, the OPC and not the member or director may be sued by the creditors.
One person company in India can easily raise money through venture capital, angel investors, incubators, and other sources because it is a private company. Getting money is now simple.
The One Person Company (OPC) is given some exemptions from compliance requirements under the Companies Act of 2013. The OPC is not required to prepare the cash flow statement. The secretary of the company is not required to provide any annual reports or maintain any account books.
And one person company in India can be easily integrated without any legal hassles. A member also serving as a director should provide the approval for integration. There is no minimum paid-up capital requirement.
Administration of the OPC can be made simple by allowing a single person to both find and lead it. Making decisions is straightforward, and it happens quickly. The member can easily pass both ordinary and special resolutions by writing them down in the minute's book and getting just one other member to sign them. Because there won't be any internal disputes or delays, managing the company will be easy.
The OPC has the function of perpetual succession even with only one member. A nominee must be chosen by the single member when incorporating the OPC. The candidate will take over the operation of the company in the event that a member passes away.
Despite having a single person running all the daily activities of the company, OPC provides options for perpetual succession. After the demise of a member of the company, the nominee can run the company.
The member in a one-person company has limited liability. Since OPC is a registered company it is treated as a separate legal entity providing greater protection to its members. The liability of the member is limited to their shares so they are not liable for any losses conducted in the company. In case of bankruptcy, the creditors can sue the company and not the director of the company for procuring the company's debt.
In a Person Company, a single member acts as a director so they stand liable for managing the company's day-to-day activities. In this case, there is no need for an executive director to run the daily needs. A single member is more than sufficient and acts as a shareholder with all responsibilities.
Since the OPC is treated as a separate legal entity the person has the right to hold property related to business and other assets in their name. The properties including machinery factories, residential property, buildings, and other assets cannot be claimed by another person. As per law, the OPC can acquire property directly under its name.
OPC company registration can be done only by Indian residents, and that too only one at a time, as per the specifications of the Ministry of Corporate Affairs.
All such businesses must maintain books of accounts, comply with statutory audit requirements and submit income tax returns and annual filings with the ROC
There is no difference in capital requirement between an OPC and a private limited company. It needs an authorized capital of ₹1 lakh, to begin with, but none of this actually needs to be paid up. This means that you don’t really need to invest any money into the business.
No general advantages; though some industry-specific advantages are available. Tax is to be paid at a flat rate of 30% on profits, Dividend distribution tax applies, as does minimum alternate tax.
The cost of an OPC is only marginally lower than that of a private limited company. You’ll be shelling out around ₹12,000 to incorporate, then paying around ₹15,000 a year in compliance fees and an auditor to inspect your books.