A one-person company is one formed by a single person. Before the enforcement of the Companies Act, 2013, individuals couldn’t establish companies. A business established by one individual could only be configured as a sole proprietorship since there had to be at least two directors and members for a company to be formed. Companies Act, 2013 permits an individual to register a company with a single director and a single member. An individual can be the director and a member of the company.
Thus, one-person companies have the features and benefits of both companies and sole proprietorships and can be owned by either a resident or an NRI. The benefits of a sole proprietorship are similar to those of an OPC, though, unlike a sole proprietorship, an OPC registration offers limited liability and separate entity status, as well as an improved business standing. Following benefits can be achieved through OPC registration:
- Limited liability: Bringing an OPC into compliance with the Companies Act, limits the liability of individual shareholders to the unpaid subscription money in their names. This ensures that their personal property is not at risk from creditors. OPC benefits from the same privileges that are available to companies listed as private limited companies under the Act.
- Remains after the founder leaves or dies: According to the Companies Act, a nominee can take over the reins of the company if the stakeholder dies or becomes incapacitated. This allows the chairmanship and management of the OPC to continue indefinitely. This legal status combined with the perpetual succession clause makes this type of business extremely famous with banks & other financial bodies.
- The return filing process is simple: Even though the annual audit of an OPC’s accounts and filing of its requisite annual returns is mandatory, the same can be easily accomplished by signing it with the director’s signature; the company secretary’s signature is not compulsory. The remuneration of directors, the rent, and interest paid by your company are therefore deductible expenses, and hence they reduce the profitability and taxable income of your business.
- Helps make proprietorship more organized: The OPC will thus bring the unorganized sector of business into the organized version of private limited companies. Different small and medium businesses could therefore enter the corporate domain that is currently doing business as sole proprietorships. A structured version of the OPC will therefore provide more advantageous banking facilities, and proprietors will always feel unlimited liability, as long as they do business through an OPC. If they do business through an OPC, however, their liability is capped.
- Fewer compliances to follow: Thus, by the Companies Act, 2013, a one-person company is defined as a Private Limited Company, giving an OPC to comply with the provisions applicable to private companies.OPCs are nonetheless exempted from many of these requirements, and their compliance burden is also smaller.
The benefits of incorporating a Person Company are similar to that of forming a Private Limited Company. So, if you are looking forward to getting your OPC registered, make sure to check the one person company registration cost before making your final decision.
