FREQUENTLY ASKED QUESTIONS (FAQs)
Only a natural person (Not Association of persons, Body of Individuals, Company, or any other entity) who is a resident of India in preceding calendar year (stayed in India for 182 days) can form OPC
You cannot incorporate more than one OPC or be the nominee of more than one OPC
No, an OPC can be formed only by an Indian citizen residing in India.
An OPC should have a minimum of one (1) director and a maximum of fifteen (15) directors. In case the Board consists of only one director, then the OPC is exempted from the requirement of conducting a Board Meeting as well.
| One Person Company | Sole Proprietorship |
|---|---|
| Completely separate entity from Promoter | No distinction between owner and the business |
| Limited liability of shareholder | Sole liability |
| Taxed in same manner as private limited company. Distribution of dividend may attract dividend distribution tax. | Less tax implications |
| Succession through nominee | Succession through execution of will |
| Like Private Limited Company has to file annual returns every financial year | Need to get its accounts audited under Income Tax Act, 1961 once turnover crosses certain limit. |
| One Person Company | Private Limited Company |
|---|---|
| A single person can register a OPC | Atleast 2 persons are reuired to register a Private Limited Company |
| OPC cannot raise funding by selling its stake and hence not eligible for startups. | It is a perfect form of business for startups in India. |
| OPC can have only one shareholder but can have more than one Director | Minimum of 2 shareholders and 2 directors are needed to start a private limited company. |
| It can be converted into private limited company only after 2 years | It can be converted into Public limited company but not into a OPC |
OPC cannot be incorporated or converted into Section 8 Company (i.e. company with charitable objects, etc.) or carry out non-banking financial activities, including investment in securities of any body corporate.
There can be five types of OPCs that can be incorporated under the new Act, viz.
1. OPC Limited by Shares;
2. OPC Limited by Guarantee with Share Capital;
3. OPC Limited by Guarantee without Share Capital;
4. Unlimited OPC with Share Capital, and
5. Unlimited OPC with Share Capital.
If a OPC hits an average three-year turnover of over Rs. 2 crore or has a paid-up capital of over Rs. 50 lakh, it must be turned into a private limited company or public limited company within six months.
The yearly compliance cost for maintaining the One Person Company (OPC) is somewhere around 8000 to 15000 which actually depends upon your turnover of the Company. Further, in case you have zero turnover company, then also compliance cost will there because compliance is mandatory in any case.
OPC is a private limited company and hence eligible for startup benefits as laid down by the government under the startup India Scheme. However, the biggest problem in this form of business is that it cannot raise funding from venture capital or angel investor by selling its stake/shares. OPC cannot sell its stake because there can only be one shareholder in the company.