The Ultimate Guide to Setting Up a One Person Company: Everything You Need to Know

INTRODUCTION

Minimum requirements to set up a one person company

There are a few prerequisite conditions you need to fulfill in order to set up a one person company.

• Shareholder: The director of the one person company is the sole owner of all the shares it issues. The liability is also limited up to the unpaid amount on shares held by them.
• Resident director: The director of the one person company is required to be an Indian resident or has lived in India for at least 120 days in the immediately preceding financial year.
• Office address registration: The one person company needs to have a registered office address where all the formal correspondence is sent to and are required to maintain all the records and account books at this address.
• Unique and valid name of company: The one person company should have a name that is legally available, valid and suitable for use.
• Capital investment: The shareholders should decide the capital as the minimum value is not prescribed in the companies act, 2013.

Advantages of having OPC

• Limited liability Protection: This means even if the company bears any loss, then only the investment being invested in the OPC will be at a loss thus the personal asset of the director is safe even if the company goes bankrupt.
• Separate legal entity: This means that the OPC will be distinct from its members thus it can buy, own and sell assets, come under contract etc. under its name.
• Organized Sector of Proprietorship: OPC will bring the unorganized sector of proprietorship into the organized version of a private limited company. Various small and medium enterprises, doing business as sole proprietors, might enter the corporate domain.
• Transferability: In comparison to traditional companies, it is easier to transfer ownership of a one person company to another person. This can be done simply by transferring shares.
• Cost requirement: In comparison to private limited companies and LLP, the one person company requires a less amount of money to set up your own business.
• Continuity and Perpetual Existence: The death or incapacity of the member doesn’t affect the company’s existence.
• Faster decision making: With only one person operating and managing the company, the decision-making process becomes much faster as there are less formalities and regulations required in comparison to other types of companies.
• Authorized share capital required: No minimal authorized share capital is required for a one person company. This was done to promote entrepreneurship and to ease the process of starting a business for individuals.

Steps for One person company registration

• Apply for DSC: The director will first apply for Digital Signature Certificate (DSC). In India it is issued by the Certifying Authorities (CA). DSC is required for ensuring secure online transactions and documentation in the process of formation of corporation and company.
• Apply for DIN: After applying for DSC the director needs to apply for Director Identification Number (DIN). DIN is a unique identification number which is provided to all the proposed and existing directors of the company. For the formation of OPC it is mandatory to have a DIN.
• Name approval: The company needs to choose a valid, unique and suitable name of the company which goes with the guidelines to submit their name to the Registrar of Companies (ROC).
• File forms with MCA: After the name is approved, you need to file an application for the incorporation of OPC. The forms like SPICE+, SPICE-MOA and SPICE-AOA are to be compiled and submitted to the Ministry of Corporate Affairs (MCA). It can take around 15-20 days for registration of OPC if the registrar is satisfied with the submission.

Documents required:

• Copy of Aadhar card or Voter Id: These are required for identity and address verification.
• Passport size photograph: These are required for various registration forms.
• Copy of PAN Card: These are required for identity verification and tax registration purposes.
• Reservation application of name: This form is used to apply for the reservation of company name.
• Valid address proof of office: These are required for checking the validity of the office address; for example, the latest electricity bill.
• Copy of Aadhar card or Voter Id of nominee: These are required for verifying the identity and address of the nominee.
• Written consent of nominee: These are required to obtain the written consent of the nominee and that he is willingly taking part in it without any coercion.
• Memorandum and Affidavit: This form is used for declaration of compliance with the requirements and rules for the legal formation of a one person company.
• Application for company registration: This is the form for final application of registration of a one person company.

Conclusion

For the individuals who are looking to start their own business without the complexities of a traditional large company should consider one person company as a great option. It offers benefits of both sole proprietorship and a company with the freedom of sole ownership and benefits of limited liability, which protects the personal assets of the director from being affected in case the company goes bankrupt. Remember, the journey of a thousand miles begins with a single step. Take this step towards setting up your own one person company today! Good luck.