Introduction
For solo entrepreneurs in India, choosing the right business structure is vital for success. A One Person Company (OPC) offers a unique solution for a business owned by one person, combining the limited liability of a company with the simplicity of a sole proprietorship.
Introduced under the Companies Act, 2013, OPCs empower one person startups to operate with a separate legal entity and perpetual succession. This guide explores the one person company definition, features, benefits, registration, compliance, tax advantages and comparison with sole proprietorships, helping you decide if an OPC is ideal for your single person company.
What is a One Person Company (OPC)?
A One Person Company (OPC) is a business structure where a single individual acts as both director and shareholder, per Section 2(62), Companies Act, 2013. Unlike traditional companies needing multiple members, OPCs provide limited liability, protecting personal assets from business debts. OPCs require a nominee to ensure continuity if the sole member is incapacitated.
This makes OPCs perfect for freelancers, consultants and small-scale entrepreneurs seeking a professional identity through a 1 person company.
For example, a software developer can launch a one person consulting company to gain credibility while safeguarding personal assets.
Key Features of OPC
- Sole Membership: One member owns and manages the company.
- Nominee: A nominee (not a minor) takes over if the member dies or is incapacitated (Section 3(1)).
- Directorship: Minimum one director, up to 15; the member can be the director.
- Capital: No minimum capital required; authorized capital often starts at ₹1 lakh.
- Limited Liability: Protects personal assets from business liabilities.
- Compliance Relaxations: No Annual General Meetings (AGMs), director-signed returns and higher director remuneration (Section 92).
- Conversion: Must convert to a private limited company if turnover exceeds ₹2 crores or capital exceeds ₹50 lakhs.
- No FDI: Foreign Direct Investment is not allowed.
Advantages of OPC
- Separate Legal Entity: Enhances corporate identity for a single-person company.
- Limited Liability: Shields personal assets, unlike a sole proprietorship.
- Funding Access: Easier to secure loans or attract venture capital.
- Simplified Compliance: No AGM or cash flow statement needed.
- Easy Incorporation: Requires one member and one nominee.
- Perpetual Succession: Continues via nominee, ensuring business continuity.
- Sole Control: Quick decisions for a one-person company.
Disadvantages of OPC
- Small-Scale Focus: Limited to one member, restricting expansion.
- Restricted Activities: Cannot engage in Non-Banking Financial Companies (NBFCs) or charitable activities (Section 8).
- Ownership-Management Overlap: Sole control may reduce accountability.
- No FDI: Limits global scaling.
- Conversion Mandate: Must convert if thresholds are exceeded.
OPC for Professionals
OPCs are ideal for professionals like consultants, freelancers and designers. A one person consulting company offers limited liability and a professional identity, attracting clients and banks. For instance, a digital marketer can formalize their single person company, enhancing credibility with minimal compliance.
Professions like software development, graphic design and financial advisory benefit, allowing solo entrepreneurs to leverage corporate benefits without partners.
Tax Benefits of OPC
OPCs enjoy tax advantages under the Income Tax Act, 1961:
- Corporate Tax Rate: 25% for turnover up to ₹250 crores, lower than standard rates.
- MAT Exemption: No Minimum Alternate Tax for turnover up to ₹5 crores.
- Loss Carry Forward: Losses can be carried forward for 8 years, aiding tax planning.
- Dividend Tax: No additional tax on reinvested profits, unlike sole proprietorships with personal tax rates.
Example: An OPC earning ₹50 lakhs pays ~₹12.5 lakhs in tax (25%), often less than personal tax slabs for sole proprietorships.
Comparison: OPC vs. Sole Proprietorship
A sole proprietorship is a business structure with unlimited liability and no separate legal entity. Here’s how it compares to an OPC:
Example: A business owned by one person as an OPC avoids personal asset risk, unlike a sole proprietorship.
| Aspect | One Person Company (OPC) | Sole Proprietorship |
| Legal Status | Separate legal entity. | No separate entity. |
| Liability | Limited liability (Section 34(3)). | Unlimited liability. |
| Compliance | Annual filings, audits. | Minimal compliance. |
| Taxation | Corporate tax (25% up to ₹250 crores). | Personal tax rates. |
| Continuity | Perpetual succession. | No continuity. |
| Funding | Loans, investors possible. | Limited funding. |
OPC Registration Process
Registering an OPC involves:
- DSC: Obtain Digital Signature Certificate with PAN, Aadhaar.
- DIN: Apply for Director Identification Number via SPICe+.
- Name Approval: Submit “ABC (OPC) Private Limited” via SPICe+ (Section 4).
- Documents: Memorandum of Association (MoA), Articles of Association (AoA), nominee consent (Form INC-3), office proof.
- MCA Filing: Submit SPICe+, SPICe-MoA, SPICe-AoA; PAN/TAN auto-generated.
- Certificate: Issued by ROC in 3–7 days.
Documents: PAN, Aadhaar, utility bill, nominee IDs; NRIs need notarized passport.
Costs and Timeline
- Costs: Government fees (₹5,000–₹10,000), DSC (₹1,500), professional fees (~₹5,000–₹15,000), stamp duty (Indian Stamp Act, 1899). Total: ~₹15,000–₹30,000.
- Timeline: DSC/DIN: 1 day; name approval: 2–3 days; incorporation: 3–7 days; total: ~5–10 days.
- Tip: Use MCA portal for efficiency.
Compliance Requirements
OPCs have simplified compliance:
- Financial Statements: File Form AOC-4 within 180 days of fiscal year-end (Section 137).
- Annual Return: Form MGT-7 within 60 days.
- Audit: Mandatory by Chartered Accountant.
- Board Meetings: Two annually, 90-day gap.
- Tax Returns: By July 31; tax audit if turnover exceeds ₹1 crore.
- Director KYC: File Form DIR-3 KYC by September 30.
- Auditor: Appoint via Form ADT-1 for 5 years.
Case Study: OPC Success
Rahul, a Bengaluru freelancer, launched “TechSolo (OPC) Private Limited.” As a 1 person company, he protected his savings with limited liability. With no AGM, he filed Form AOC-4 annually. A ₹10 lakh loan was secured due to his corporate identity. His nominee (sister) ensured business continuity during illness.
Frequently Asked Questions on One Person Company (OPC)
Q1. What is a one person company?
Ans1. A one person company is a business structure owned by one individual, with limited liability and a separate legal entity (Section 2(62), Companies Act, 2013).
Q2. How does an OPC differ from a single person LLC?
Ans2. An OPC follows Companies Act, 2013 with a nominee, while a single person llc follows U.S. state laws.
Q3. Can a one person business have limited liability?
Ans3. Yes, a one person business as an OPC offers limited liability.
Q4. What is the best one person business to start?
Ans4. Best one person business to start includes consulting, digital marketing or freelancing as an OPC.
Q5. Can I start a one person consulting company as an OPC?
Ans5. Yes, a one person consulting company as an OPC offers limited liability.
Q6. How do I register a one person company?
Ans6. Register via DSC, DIN, name approval (SPICe+), documents and Certificate of Incorporation (Section 7).
Q7. What is the role of a nominee in an OPC?
Ans7. The nominee takes over if the sole member dies or is incapacitated, ensuring perpetual succession.
Q8. Can an OPC convert to a private limited company?
Ans8. Yes, if turnover exceeds ₹2 crores or capital exceeds ₹50 lakhs.
Q9. Is FDI allowed in a one person company?
Ans9. No, FDI is prohibited in OPCs.
Q10. How is an OPC taxed compared to a sole proprietorship?
Ans10. OPCs face corporate tax (25% up to ₹250 crores); sole proprietorships use personal tax rates.
Q11. What are the compliance requirements for an OPC?
Ans11. File AOC-4, MGT-7, conduct audits, hold two board meetings annually (Section 137).
Q12. Can an NRI own a one person company?
Ans12. Yes, an NRI can own an OPC with proper documentation.
