About One person Company (OPC)
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Limited Liabilities
The biggest difference between a sole proprietor and a One Person Company would be that in case of a One Person Company, your liability in case the business fails, is limited to only the business assets. In case of a proprietorship, the liability is unlimited and the creditors of your business can even take hold of your home and personal assets like your house, personal bank accounts, jewellery etc which can be used to settle the business liabilities.
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Who can Start OPC
Only a natural person who is a resident of India and also a citizen of India can form a one person company. It means that other legal entities like companies or societies or other corporate entities cannot form a one person company. Further it also means that Non resident Indians or Foreign citizens cannot form a One person company. Further the rules also specify that a person can be a shareholder in only one one person company at any given time.
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One Director
The other important point is that a One Person Company may have only one director. But at the same time there is no bar on more number of directors. However, as per the Act, the total number of directors shall not be more than 15.
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Nominee
This is a very important concept where the person forming the One Person Company has to nominate a Nominee with his written consent who, in the event of death or inability to contract of the owner of the One Person Company, shall come forward and take over the reins of the one person company.
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Taxation
Since nothing has been specified as such by the finance ministry, it is assumed that the rates of taxation applicable for a private limited company shall apply to a One Person Company. Net profits, which are calculated by deducting all allowable expenses from the turnover of sales, shall be taxable at the rate of 30 percentage + education cess.
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Freedom from compliance
One Person Company also gets freedom from complying with many requirements as normally applicable to other private limited Companies.
- No requirement to hold annual or extra ordinary general meetings.
- No requirement of preparing cash Flow in the annual financial statements.
- Annual returns can be signed by the Director himself instead of A Company Secretary
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Conversion from OPC to Pvt Ltd Company and vice versa
It is provided in the Act that when a One Person Company reaches a paid up Capital of 50 lakh rupees or more or when the average turnover of the company which is Rs. 2 Crores or more for a period of 3 years, then the company shall be converted into a private limited company after making the necessary changes in the memorandum of association and articles of association and shall comply with all the requirements of a private limited company.
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