• Step 1: Obtain Digital Signature Certificate (DSC)

  Director’s DSC:

  The first step is to obtain a Digital Signature Certificate (DSC) for the proposed director. The DSC is used for signing the electronic incorporation documents.

• Step 2: Obtain Director Identification Number (DIN)

  Apply for DIN:

  The next step is to obtain a Director Identification Number (DIN) for the proposed director. DIN is obtained by filing Form DIR-3 on the Ministry of Corporate Affairs (MCA) portal.

• Step 3: Name Reservation

  Name Reservation:

  File Form SPICe+ (Part A) for name reservation. Provide up to two preferred names for the OPC. The name should be unique and comply with the Companies (Incorporation) Rules.

• Step 4: Drafting of Memorandum of Association (MoA) and Articles of Association (AoA)

  Draft MoA and AoA:

  Draft the Memorandum of Association (MoA) and Articles of Association (AoA) in accordance with the Companies Act. These documents define the company’s objectives and rules for internal management.

• Step 5: OPC Incorporation Application

  Complete SPICe+ (Part B):

  File Form SPICe+ (Part B) for the incorporation of the OPC. Provide details such as the registered office address, details of the director and nominee director, and other relevant information.

• Step 6: Professional Certification

  Professional Certification:

  Obtain a professional certification from a Chartered Accountant, Company Secretary, or Cost Accountant confirming compliance with the incorporation requirements.

• Step 7: Submission of Documents

  Submit Documents:

  Upload the required documents, including identity proofs, address proofs, consent letters, and professional certifications, on the MCA portal along with the SPICe+ (Part B) form.

• Step 8: Payment of Fees

  Payment of Fees:

  Pay the prescribed fees for incorporation, name reservation, and other applicable fees through the MCA portal. The fee structure may vary based on factors such as authorized capital.

• Step 9: Verification and Approval

  Verification and Approval:

  Once the documents and fees are submitted, the Registrar of Companies (RoC) will verify the application. If everything is in order, the RoC will issue the Certificate of Incorporation.

• Step 10: Issue of Certificate of Incorporation

  Certificate of Incorporation:

  Upon successful verification, the RoC will issue the Certificate of Incorporation for the OPC. This document officially confirms the existence of the company.

• Step 11: PAN and TAN Application

  Apply for PAN and TAN:

  After receiving the Certificate of Incorporation, apply for the company’s PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number).

• Step 12: Bank Account Opening

  Open Bank Account:

  Open a bank account in the name of the OPC using the Certificate of Incorporation and other required documents.

• Step 13: Business Commencement

  Commencement of Business:

  Start business operations after obtaining the Certificate of Incorporation and complying with any additional requirements.

Advantage of OPC PRIVATE LIMITED

Single Entrepreneur: An OPC is designed for a single person (natural person) to establish a company. This individual is the sole shareholder and director of the company.

Limited Liability:Like other limited liability structures, an OPC provides limited liability to the sole shareholder. The personal assets of the shareholder are separate from the company’s liabilities.

Separate Legal Entity: An OPC is considered a separate legal entity distinct from its owner. It can own property, enter into contracts, and conduct business in its own name.

Nominee Director: An OPC must appoint a nominee director during its incorporation. The nominee director comes into play if the sole director becomes incapacitated or dies. The nominee can take over the management of the company in such situations.

Conversion to Private Limited Company: As the business grows, an OPC has the option to convert into a private limited company. This allows for the infusion of additional capital and the inclusion of more shareholders.

No Minimum Capital Requirement: There is no minimum capital requirement for the incorporation of an OPC. The company can be formed with any amount of authorized and paid-up capital.

Annual Compliance: OPCs are required to comply with annual filing and regulatory requirements similar to other types of companies. This includes filing annual returns, conducting audits, and adhering to the Companies Act.

Limited Taxation Benefits: While OPCs enjoy certain tax benefits, they are subject to standard corporate income tax rates. It’s essential to consider the specific tax implications based on the business’s activities and turnover.

No Requirement for AGM: An OPC is not required to hold an Annual General Meeting (AGM) in the same way as other private limited companies. The sole member can communicate resolutions instead.

Single Director’s Report: The director’s report in an OPC can be signed by the sole director, simplifying the reporting process.

Restrictions on Multiple OPCs: A person can be a member in only one OPC at a time. If a person already has an OPC, they cannot incorporate another OPC.

Exclusion from Certain Business Activities: Certain business activities, such as non-banking financial investment, cannot be undertaken by an OPC. It’s important to consider the permissible activities.

OPCs provide a suitable option for individual entrepreneurs who wish to operate as a company while limiting their personal liability. The regulatory framework for OPCs is governed by the Companies Act in India.

Disadvantage of OPC PRIVATE LIMITED

While OPCs (One Person Companies) offer various benefits, they also come with certain disadvantages and limitations. Entrepreneurs should be aware of these factors before choosing this business structure. Here are some disadvantages of an OPC:

Limited Capital Infusion: An OPC may face challenges in raising capital compared to larger companies. The structure may limit the ability to attract substantial investments, as there is only one shareholder.

Nominee Director Complexity: The requirement to appoint a nominee director can add complexity to the management structure. While the nominee’s role is primarily to take over in case of the sole director’s incapacitation, managing relationships and decision-making can be more intricate.

No Subsidiary Formation: An OPC cannot incorporate another OPC or act as a nominee for another OPC. This restriction limits the ability to form subsidiaries under the same structure.

Limited Tax Planning Opportunities: OPCs may have fewer tax planning opportunities compared to larger structures. The flexibility in tax planning, especially in terms of dividends and profit distribution, is somewhat restricted.

Conversion Process: If the business grows beyond the thresholds set for an OPC, it may need to be converted into a private limited company. The conversion process involves additional paperwork and formalities.

Stringent Compliance Requirements: While OPCs generally have fewer compliance requirements compared to larger companies, they still need to comply with statutory regulations. Failure to meet these requirements can result in penalties.

No Applicability for Certain Businesses: OPCs cannot carry out certain types of business activities, such as non-banking financial investment activities, making them unsuitable for specific industries.

Restrictions on Number of OPCs: An individual can be a member in only one OPC at a time. If a person already has an OPC, they cannot incorporate another OPC.

Limited Professional Image: Some businesses may prefer the professional image associated with a private limited company over an OPC, especially when dealing with clients, suppliers, or partners.

Dependency on Sole Director:The success and decision-making in an OPC largely depend on the capabilities and decisions of the sole director. Any challenges or disruptions to the director’s role may impact the company significantly.

Risk of Oppression and Mismanagement: Minority shareholders (if any) may face a risk of oppression or mismanagement by the sole director. Legal remedies are available, but pursuing them can be time-consuming and costly.

Limited Employee Stock Options (ESOPs): While OPCs can offer ESOPs to attract and retain talent, the structure may not be as effective in this regard as larger companies.

Entrepreneurs should carefully evaluate their business goals, growth plans, and specific requirements before opting for an OPC. It’s advisable to consult with legal and financial professionals to make informed decisions based on the unique characteristics of the business.

Frequently Ask Questions (FAQs)