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19
Aug
17
How is One Person Company different from Sole Proprietorship?

A Sole Proprietorship firm is also known as a sole trader or simply a proprietorship. It was a popular form of business prior to the introduction of One Person Company due to its simplicity, ease of setup, and nominal cost. It is a kind of business set up in which a single person owns the business and is solely responsible to pay all the debts of the firm. One of the biggest disadvantages of this type of company is that the identity of sole proprietor is not distinct from the identity of the firm thus the liability of the owner is unlimited.

To overcome the drawbacks of sole proprietorship the concept of One Person Company was introduced through Companies Act 2013. One Person Company contains the features of both the sole proprietor and the company. This concept was introduced to help the sole proprietor in fulfilling their desire to start a business with limited liabilities. One of the major benefits of the one person company over the sole proprietor company is that the one person company formed is a separate legal entity from its members and the liability of the owner is limited.

Difference between Sole Proprietorship and One Person Company is as follows-

Basis

One Person Company

Sole Proprietorship

Liability

The liability of the member is limited to his share.

The liabilities of the members are unlimited.

Legal identity of entity

It has a separate legal identity from its members.

It is not considered as a distinct identity from its members.

Registration

OPC can be registered under Company Act 2013.

Registration of sole proprietorship is not compulsory.

Taxation

OPC will be taxed in the same way as a company.

It will be taxed as an individual.

Existence

An OPC does not get dissolved with the death or retirement of the member.

The life of this form of the company comes to an end with the retirement of the sole proprietor.

Compliance

 

 

 

 

Conversion

 

 

 

    

Maximum number of members    

 

Foreign Ownership                           

It is required to file annual returns and get its accounts audited.

 

 

 

An OPC will be converted into private limited company if has an average turnover of over Rs. 2 crore for three years or a paid-up share capital of over Rs. 50 lakh.

 

It can have maximum 2 members.  

 

 

 

Foreign ownership is allowed in case one member is director and the other is nominee. However both director and the nominee cannot be the foreign citizens.                                       

It is required to get its account audited only if its turnover exceeds the threshold limit as per income tax act.

 

A sole proprietor will always remain a sole proprietor irrespective of its turnover.

 

 

It can have only 1 member.

 

 

 

Foreign ownership is not allowed.

 

 

 

 

25
May
17
One person company compliance in India

Compliance is a term or we can say a provision to maintain company’s annual filing, books of account and other statutory requirement. It is mandatory information needed to be informed to the central government. People need to spend some money on their Company so that their company runs uniformly without any legal barrier.

One Person Company is liable to certain Compliance which needs to be completed with a month from Date of Incorporation. Company should accept foregone reality that compliance will help entrepreneurs to do business with comfort and ease. The concept of OPC was evolved to eradicate the limitation of a sole proprietorship which was introduced in Companies act, 2013.It is one of the newest and one of the most popular form of Company. In OPC Person enjoys commencement of Business without any involvement of any other person.

In comparison with Private Limited Company OPC have lesser compliance formalities. Below are mandatory compliance requirement.

Corporate Stationary

After OPC registration it is recommended to purchase the following stationary for use with OPC compliance matters.

Name Board is the requirement of the company. Companies including an OPC are required to paint or affix the name of the company and address of its registered office outside every office or place in which it carries on business.

Company’s Rubber Stamp is a round rubber bearing name of the company and straight rubber stamp bearing the name of the company along with designation of the authorised signatory can be purchased from the local vendor. It is required for the execution of various legal documents like Board Resolutions, bank account opening forms, cheques, etc.

Letterhead is a printed heading which should be mentioned including name and registered office address of the OPC. It consists of all the forms of invoices, notices and other official documents of the company.

In case of OPC ‘‘One Person Company’’ must be mentioned in brackets below the name of the company, wherever its name is printed whether it has been affixed or engraved.

OPC PAN Application

Obtaining PAN card is the first step after incorporation of any corporate legal entity. PAN can be applied online after incorporation to receive the PAN allotment letter. The letter must then be signed by the OPC Director, sealed with company rubber stamp and couriered to the NSDL office. PAN Card will be issued in about 15 days after receipt of the hard copy PAN application from the applicant.

Opening OPC Bank Account

Proprietorship bank account opening is a bit tricky but opening bank account for a OPC is very simple. Additional tax registrations or documents are required to open a bank account for a OPC. According to the Reserve Bank of India’s KYC norms, the following are the documents required to open a current account in the name of a OPC:

  • Self-attested copies of OPC Certificate of incorporation
  • Memorandum of Association and Articles of Association 
  • Open Bank for Company
  • Copy of the telephone bill;
  • Copy of PAN allotment letter;
  • Identity proof of the Director

Documents submitted for opening of bank account must be self-attested with seal of the company. Hence, its important to obtain company seal and company letterhead after incorporation of the OPC.

Appointment of Auditor

Appointment of the Auditor of the Company is a requirement, it can be individual; practising Chartered accountant within 30 days of incorporation. In case of OPC as well, an Auditor must be appointed by the Director of the OPC for auditing of financial statements of the company.

OPC Annual General Meeting

All companies other than a OPC is required to hold a AGM(Annual General) each financial year with not more than fifteen months elapsing between the date of one annual general meeting of a company and that of the next. However, in case of a OPC where there is only one director on the Board of Directors, then it is sufficient for the resolution by one Director be passed and entered in the minutes-book. The signed and dated resolution by Director of a OPC is deemed to be the meeting of the Board of Directors for all the purposes under the Companies Act. Also, provisions relating to quorum for meetings of Board do not apply to a OPC where there is only one Director on its Board of Directors.

OPC Financial Statements

All companies are required to prepare and file with the ROC, the following financial statements:

  • Cash flow statement for the financial year
  • Balance sheet as at the end of the financial year;
  • Profit and loss account;
  • Statement of changes in equity, if applicable;
  • Explanatory note forming part of any document.

Compliance in OPC is needed for the rapid growth and it is necessary that it stays clear of unnecessary legal paraphernalia. Falling in line with the compliance system ensures that in certain cases it can all be sorted with a warning but when the issue is a graver one, the companies end up paying fines for not following the compliance.

Reasons why should OPC be compliant

Improved Public Relations- Marketing and advertising becomes easy after fulfilling all the legal obligations. Company become Job Creator encouraging more and more people becoming part of the Company. Good compliance management creates good reputation in the market.   

Employee retention There are many compliance issues that deal with the benefit of the employees, some these even talk about protecting the employees. For a company that adheres to these guidelines, it becomes easy to retain the employees as the workforce of the company feels home in the company and strives to work for the betterment of the business and the product.
Thus, for a One Person Company, which anyway is bound by a lot of compliance guidelines, it is paramount to manage all that. As in the longer run it showers the company with all the benefits that may or may not be visible in the beginning.

  • Smooth operations

Certain rules help more than they harm. Rules related to discrimination and harassment help create a better working environment for employees which can lead to better productivity. Also better security – financial as well physical – help employees provide more to the company.

09
May
17
Women Director of the Company
India is a country of opportunities where all people have equal right. According to Indian Constitution people, All the citizen in India deserves equal right whether they are of any…
20
Feb
17
Types of Companies under Ministry of Corporate Affairs

Ministry of Corporate affairs is an Indian ministry that is primarily concerned with Companies Act, 2013, Companies Act, 1956, Limited Liability partnership act 2008 and other  rules and regulations. The responsibility of this Ministry is regulation of Indian enterprises in Industrial and Services sector.

Companies can be registered in India

Private Limited Company-It is the type of company recommended for Business. The cost of registration of the private limited company is cheaper than other forms of a company. Private limited should have a minimum of 2 members and can have maximum 200 members. In this company liabilities are limited and it has some features of a partnership.

People mostly prefer this of the company for fundraising. The degree of operation and ownership can easily separate in this type of company. Business can be exited without any hassle. In this members are limited to only contribute towards a number of shares.      

One Person Company-It is the type of company which can be started by a Single member.OPC is the latest form of company in Companies Act, 2013. One person can become the director as well as the shareholder. Similar to the private limited company as the degree of operation and ownership are on the separate basis. 

OPC gives wings in the hand of Sole proprietor to form the company under with full control. It is done without any interference of the third person. This type is easy for an entrepreneur to directly target the market. Fundraising from banks and the financial institution is easy. People who are Indians and resident in India can form OPC.     

Public Limited Company-This is a publicly held company. A large amount of capital investment can easily be obtained. These types companies are considered to be a more transparent business model as compared to other business structures. Investors get the choice of transferring their ownership in the company without any hassle by just selling the shares.

Section 8 Company-These companies are basically formed to encourage arts science, sports, education, research, social welfare, religion, charity, etc. These kinds businesses do not play any vital role in profit. Company Intends to prohibit the payment of any dividend to its members. These companies are the non-profit making company.

Section 8 company was incorporated mainly for welfare purposes. Previously, it was defined as Section-25 Company. Due to commencement of Companies act, 2013 it was called as Section-8 Company

Nidhi Company- Nidhi Company comes from the Hindi word ‘Nidhi’ means fund. These are the  NonBanking financial corporation. These are also known as mutual benefit funds. Nidhi company is known in the corporate scenario is member benefits company. Companies are formed for the welfare of the members and to increase saving habits.  

Other types of Companies

There are some more types companies which can be registered in India.

  • Companies that have unlimited liability
  • Producer Company
  • Joint Venture Company
02
Feb
17
Why should entrepreneurs prefer one person company?

One person Company is a new venture for Start-ups .OPC can be formed by a single person. This concept which was proposed under the Companies act 2013.Person gets privilege to form a company by making a combination of sole proprietor and entrepreneur. OPC is a hybrid structure of the combination of many benefits of limited liabilities.

OPC is a new concept which will take around few years for expansion between its audience. By the time this will be common between the public then it will have a rapid explore. OPC is an opportunity for those who want to take their business on an international level.

In OPC investors have to deal with only one member which do not create any disturbance amongst idea of Business. The concept of OPC is a success in many of the countries Outside India where people have given their business a drastic growth.  

Advantages of OPC

  • Only 1 person can be director or shareholder.
  • Easy to manage continuity and incorporate.
  • Easy to transfer to another person.
  • No professional qualification required to become a director.
  • Confidential sense is provided towards customer and suppliers.
  • Lesser compliance cost.
  • Separation of juristic person and legal entity
  • The company is kept uninterrupted until it is dissolved.
  • Access to credit, bank loan, market, etc.

Steps to form OPC

  • Obtain Digital Signature Certificate.
  • Obtain Director Identification Number.
  • Select the name and make an application to the ministry of corporate affairs office name availability.
  • Sign and file various documents including MOA-Memorandum of association & AOA- Articles of Association with the Registrar of Companies electronically.
  • Pay the Requisite fee and Stamp duty to Ministry of Corporate Affairs.
  • Collect Receipt of Certificate of Registration/Incorporation from ROC.

Disadvantages of One Person Company

  • Setting up an OPC is not an easy task.
  • More Formalities are required as in the comparison of other forms Private Company.
  • Investment in the shares and securities of the corporate which is not a good part for OPC.
  • OPC cannot be converted into the public company or a private company once it has been incorporated.
  • Higher tax rate which causes disinterest to form OPC.

One person company encourages small scale businessman to form company and expand it on a larger scale .OPC has given many entrepreneurs a chance to form their company and built their business with their own name being the director of the company. Business growth is the agenda of every company.OPC keeps the audience confident about the brand. 

20
Jan
17
What is One Person Company in India?

A business entity run by a sole owner with the benefit of limited liability, offering protection to its shareholders is a One Person Company. Only one Director is required to form a One Person Company.

With supporting documents such as DIN, DSC, etc., an OPC can be registered within two weeks.

Features of One Person Company

  • Director

As the name suggests, a minimum of one Director and one member is required to form a One Person Company. Hence, the sole shareholder can be the Director itself. A maximum number of 15 Directors are possible for a One Person Company.

  • One Shareholder

A person of Indian origin and an Indian citizen can form a One Person Company.

  • Nominee for the Shareholder

A shareholder may appoint another person as a shareholder in case of death or incapacity of the original shareholder. The nominee shall give its consent to be appointed as the sole shareholder.

  • Taxation

As the government has not strictly specified, the tax rates for any Private Limited Company are applicable to a One Person Company.

  • Compliance

One Person Company has the leverage of not complying with many requirements that are applicable to a Private Limited Company.

Terms and Restrictions of One Person Company

  • A person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company.
  • Only a person who is not a minor is eligible to be a nominee of the One Person Company
  • One Person Company cannot be incorporated or converted into a limited company
  • A One Person Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate.
  • Such a company cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, unless the capital is increased beyond Rs.50 Lakhs or its average annual turnover during the relevant period exceeds Rs.2 Crores

Advantages of One Person Company

  • One Person is a separate legal entity from its members
  • Liability of member is limited
  • One Person Company being a Private Limited Company is best suited for new entrepreneurs
  • As in the case of any other Company, mandatory requirement of an auditor is not applicable
  • The necessity to hold a number of Board Meetings and General Meetings does not apply to One Person Company

Process to Incorporate One Person Company

  • Obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the proposed Director(s) in case it is not already available
  • Check for Company name availability by filing form INC-1
  • Obtain consent of nominee for the sole shareholder
  • Draft Memorandum of Association and Articles of Association
  • Once the name of the Company is approved, sign and file various documents electronically including MOA and AOA along with form INC-2, which is required for the incorporation of the Company, with the Registrar of Companies
    • Form INC-2 must be filed within 60 days of filing form INC-1
  • Payment of Requisite fee to Ministry of Corporate Affairs and also Stamp Duty
  • The Registrar of Companies scrutinizes and validates the documents
  • Receipt of Certificate of Registration/Incorporation from the Registrar
23
Nov
16
10 Reasons why start-ups should choose One Person Company (OPC) as their form of business

With innovation and IT boom in the country more and more people are taking up entrepreneurship and starting their own business. However, one of the most important questions for a new entrepreneur is to find out which sort of company he should float in the contemporary scenario. Going by the recent trend and business environment, the best advice one can give a nascent entrepreneur is to opt for OPC (One Person Company). There are various benefits of OPC. Some of them are listed below. Have a read:

A separate entity for law

One of the major benefits of opting for an OPC is that according to law a separate legal entity is created. And it means that the company will be legally equipped to do almost everything a person is allowed to do in a legal set-up.

Smooth funding

Getting funding is relatively easier for an OPC. It can manage funding from financial institutions, angel investors etc. Thus an OPC, gradually over the course of time, can even turn itself into a Pvt ltd company.

Limited liability

Every start-up dreams of being as little risk prone as possible. Hence it is always on a lookout for limited liability. OPC promotes its owner to go an extra mile without having to care for the liabilities it may incur in case of failure. In case of OPC, even if the company falters, liability will only affect the capital of the company and not disturb the personal assets of the owner.

Minimum regulations, maximum results

Since in OPC is under the control of one person, there are various regulations which are eased for it. Thus a new entrepreneur can always be more focused on his business rather than losing his sleep over never-ending list of regulations and laws for starting a new business in a growing economy like India.

Perks of a Small Scale Industries (SSI)

The government is always willing to promote small scale industries and has often gone extra yards to see that the everyday furnishing small scale industries grow at a decent pace. After all, SSIs form the backbone of an agrarian economy like India. An OPC falls under the category of a SSI thus it can avail all those benefits which are there for SSI units. Some of those perks include loans at lower interest rates, funds without any security from banks up to a certain limit, benefits under FTP (Foreign Trade Policy). Once a company gets these earlier benefits it goes a long way in providing it the much sought early boost.

The Sole owner

Being the sole owner of the company gives you full control over the business. While it also puts your leadership and entrepreneurship skills at test, it ensures that the decision making is quicker. Also in OPC whatever the results are you are going to be responsible for it. It makes sure that the credit for the company’s growth goes to the sole owner.

Free from the hassle of credit limit

When an OPC files for loan, the credit limit of the owner does not affect that. To put things in simpler words, even if the credit limit of the owner is not that great, his OPC will be able to generate good funds.

Favourable Income Tax Laws

Once the company is registered as an OPC, any money being spent on the salary of the director will be allowed as tax deduction. There are certain other benefits available too which are subject to income tax act.

Interest on late payment

Since almost all the start-ups fall in the category of SSI, they receive protection under Small and Medium Enterprises Development act 2006. If a buyer of the service fails to pay for it under a certain period as specified by the seller, the seller is free to charge interest on his product.

No trust deficit

If there’s a business which runs in the name of company, naturally people have more faith in it.

Also before we wind up, here is another note: Any existing business can convert it as OPC and thus avail all the aforementioned benefits.

08
Oct
16
How to Protect Your Business
However the type and size of business, it is valued by its owner(s) and as the business grows, the bigger the value gets and hence higher the protection needed. The…
06
Oct
16
SPICe

Every entrepreneur will agree that the procedure of incorporating a Company can be tedious and cumbersome despite the necessity of the steps involved. Even though, a Company can now be incorporated online as well as offline, the steps remain the same. 

The government of India has taken a significant step in easing the procedure of incorporation of a Company. On the occasion of Gandhi Jayanti, the government launched SPICe that is simplified proforma for incorporating Company electronically. 

Ministry of Corporate Affairs has simplified the procedure by introducing filing of pre-dated Memorandum or Articles of Association electronically. It will further simplify the earlier procedure of incorporating a Company using form Inc-29. As per the latest update, earlier forms may be replaced with newer SPICe form Inc-32. 

There are certain features of SPICe that are as follows. 

  • Simplified and completely digital form of Company incorporation
  • Standard format of Memorandum and Articles of Association
  • Memorandum and Articles will now be filed as linked e-forms
    • For Memorandum of Association, an applicant must only copy paste the necessities
    • For Articles of Association, an applicant may choose the clauses that are applied and choose that are not applied or need alteration
  • Provision to apply for Company incorporation with a preapproved Company name
  • Digital Signature Certificates of subscribers and witnesses will now be affixed
  • Detailed and informative Inc-32 as compared to older form Inc-29
    • Older form, Inc-29 fulfills all purposes of Company registration that is application for DIN allotment, reservation of Company name, incorporation and even PAN and TAN
    • New form, Inc-32 provides the same facility, further including the filing of Memorandum and Articles of Association electronically 

This initiative is a bold step and will increase gains with faster review of Memorandum and Articles of Association making SPICe the sole procedure to incorporate a Company in India.

Looking for company registration? Connect with us at This email address is being protected from spambots. You need JavaScript enabled to view it. or Call us at +91-8882580580

 

28
Sep
16
Privileges of One Person Company

Earlier, you needed at least two shareholders to set up a private company in India. So, if a person wanted to venture alone, the only way was through proprietorship which is a task too cumbersome in itself and hence not a very motivating option at all.

The introduction of One Person Company, or OPC, through the passing of the much awaited Companies Act 2013, by the Lok Sabha is a step that will usher corporatization of small businesses and empower small entrepreneurs, saving their time and energy and resources from complex legal processes.

If you are looking to cycle alone but are finding it daunting, here are the few privileges of a One Person Company in India listed below to motivate you.

  • Limited Liability: The most important reason for the shareholders to slot in the 'single person company' dynamics is most certainly the desire for limited liability. As mentioned before, sole proprietorship is also an option for you but OPC has its advantages. The fundamental difference between a sole proprietorship and an OPC is how the liability is treated. OPC forms a separate entity with a stark difference between the promoter and the company. The liability of the share holder will be restricted to the unpaid subscription money in his name. On the other hand, in a sole proprietorship, the person or the owner is solely accountable for the business claims which will be made. This way, the personal assets of the owner remains secured should the business land up in many a crisis
  • Compliance Burden: One person Company is included in the definition of “Private Limited Company” given under section 2 (68) of the Companies Act, 2013. Hence, an OPC will be have to live by the rules set for private companies and all the provisions will apply. But here is the good part: OPCs have been provided with a number of exemptions and therefore have lesser compliance related burden. Some of the available exemptions are: 
  • Section 96: Option to dispense with the requirement of holding an AGM
  • Section 98: Power of Tribunal to call meetings of members.
  • Section 102: Statement to be annexed to notice.
  • Section 103: Quorum for meetings.
  • Section 104: Chairman of meetings.
  • Section 106: Restriction on voting rights.
  • Section 107: Voting by show of hands.
  • Section 109: Demand for poll  
  • Organized Sector of Proprietorship Company: What OPC does well is to bring the unorganized sectors of Proprietorship into an organized version of a private limited company. That way, many small and medium businesses operating as small proprietors can enter the corporate domain. It will also provide a plethora of baking facilities to them. And the liability of the member will be limited too, as discussed above. 
  • Requirements are minimal: Some of the requirements are very basic and listed below.
    • Minimum 1 Shareholder
    • The director and shareholder can be same person
    • Minimum 1 Director
    • Minimum Share Capital shall be Rs. 1 Lac (INR One Lac)
    • Minimum 1 Nominee
    • Letters ‘OPC’ has to be suffixed with the name of OPCs to differentiate them from other companies 
  • Legal status and social recognition for your business: A one person company model is the most trusted in the world. It gives the suppliers as well as the customers a sense of confidence in your business. History suggests that large organizations favor a deal with private limited companies over proprietorship firms any day. That is because a One Person Company has a defined business structure which enjoys a corporate status, thus drawing in a more qualified workforce and then retaining them through corporate designations, say directorship. 
  • Safeguards: The process after your demise is well defined. When the original director is no longer alive, or isn't able to serve the functions owing to a disability, another individual is appointed as the nominee director. He/She in turn will manage the affairs of the company till the date of transmission of shares to legal heirs of the demised member. 
  • Easy loans from the bank: As discussed above, owing to a greater discipline in the business structure and a more qualified workforce in the corporate set-up, banks are willing to assist with hassle-free loans. In all admission, proprietary firms don't find it as easy today. 
  • One owner: The beauty of One Person Company is that the owner can appoint as many as fifteen directors in the company for administrative functions without compromising on an iota of shares. So, the real power remains vested in a single individual. 
  • Easy to manage: There is no requirement to annual general meetings, thus saving much time that can be devoted to greater tasks at hand. Only that the resolution will have to be communicated by the member of the company and entered in the minutes book, duly signed and dated by the member. That date will be considered as the date of the meeting. When it comes to board meeting, a One Person Company may conduct at least one meeting of the Board of Directors every six months however, two meetings shall not be less than 90 days apart. In addition, quorum for meetings for boards shall not apply.  
  • Goodbye middlemen: When small entrepreneurs are allowed in the business by setting up a One Person Company, the shareholders have an uninterrupted direct access to the target market and can avail credit facilities, bank loans rather than getting lost in the maze of middlemen. And not having to share your profits with middlemen is the greatest advantage. 
  • Perpetual succession: Through perpetual succession, a corporation's or other organization's existence can be continued despite the death, bankruptcy, insanity, change in membership or an exit from the business of the owner. This makes it easier for entrepreneurs to raise capital from the market. But since OPC is an entity separate from the owner, thus making him less liable, the creditors should therefore be warned that the claims against the business are not the same as claims against the owner. 
  • Filling with ROC: Very few need to be filed with the Registrar of Companies (ROC). The rotation of auditor after expiry of maximum term is not applicable, making things simpler. The provisions of Section 98 and Sections 100 to 111 (both inclusive), relating to holding of general meetings, also does not apply to OPC. 
  • Flexibility and tax savings: In OPC, it is possible for you to make valid contracts with other shareholders or with one or more of the directors. So, even if you are a director, you can receive remuneration. Even as a leaser, you can receive rent. Even as a creditor, you can receive money. There are no hard and fast rules to limit your role. 
  • Easy switch: Businesses currently run under the proprietorship model can get rechristened as a One Person Company without any difficulty. 

To summarize, a One Person Company (OPC) is a combined package: it has the qualities of a Sole Proprietorship business and that of a Private Limited Company (PLC), thus providing a continuum with the best of both worlds.

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