Start-ups Need One Person Company Registration in India: 11 Best Facts

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Introduction to One Person Company Registration

If you are planning to launch a start-up, One Person Company Registration is the best option if you don’t have a partner.

Nevertheless, most people won’t be having a whole set of knowledge about the system of formation and requirements for incorporating a One person company.

In this article, we will help you to know about One Person Company Registration, the process of incorporating it, and the legal formalities involved in its formation.

Overview of One Person Company Registration

The Companies Act of 2013 introduced the concept of One Person Company. Under section 2 (62) of the Companies Act, a one-person company is defined as a company formed with only an individual who is director and as well as owner of the company, unlike other forms of business structures where the minimum requirement of members and director is two.

One Person Company Registration allows an individual to own and manage the entire business operations. The operations of a one-person company are governed by the Companies Act of 2013.

A one-person company has some distinguishing features which differentiate it from Pvt. Ltd. The company, Limited Liability Partnership (LLP), and other forms of similar business structures.

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It is a type of sole proprietorship business in the form of a company, which gives absolute authority to an individual to own and manage the business and the same time, limiting the duties and liabilities toward the business.

Entrepreneurs in the preliminary stage of their business have a preference to create One Person Company instead of a sole proprietorship business because of the benefits offered by one person company registration.

Benefits of One Person Company Registration

Most of the people in India prefer Pvt. Ltd. Company registration because of the benefits it offers, but the people are unaware of the benefits of One Person Company registration can be obtained with very few compliances compared to Pvt. Ltd. Company and other business structures.

The following are the benefits of OPC Registration:

  • Ease in Funding

Just like a Pvt. Ltd. company, one person company can also raise funds via angel investors, venture capitals, financial institutions, etc. A one-person company can also update itself as a Pvt. Ltd. Company to raise funds.

  • Better Opportunities

One person company has better opportunities and has the advantage of limited liability, which means that the company will be limited to the value of share the owner holds in the company.

One person company registration gives the owner more chances to explore better opportunities and take risks without any pressure of losing his/her personal assets. Therefore, it is an encouraging option for innovative young entrepreneurs.

  • Incorporation with Least Requirements

No one can beat one person’s company when it comes to registering a company with the least compliances. An individual can commence a one-person company by fulfilling the following requirements:

  • A letter in the name of the company
  • Nominee
  • Director
  • Shareholder

In the case of One Person Company, the director and shareholder can be the same individual, but he/she should be an Indian citizen.

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Due to very few compliances and regulations, an individual has more time to focus on the company’s growth and functional areas.

  • Benefits for Small-Scale Industries

A one-person company is capable of availing benefits provided to small-scale industries like easy funding and no need to deposit security to certain limits, benefits under foreign trade policy, loans at cheaper interest rates, etc. Such benefits play an important role in the progress of a company in its preliminary stage.

  • Recognized as a Trustful Separate Legal Entity

Any business registered as per the Company Act of 2013 has a separate legal entity and is measured as trustworthy compared to those not registered.

Why must start-ups opt for One Person Company Registration?

One Person Company Registration
One Person Company Registration

The following are the reason a start-up should choose an OPC for its commencement:

  • One character

The superior character of this form of commercial venture structure is that you do not want some other person involved to begin the start-up.

An OPC can completely run by only one person. This will also ensure faster decision making and execution of those decisions. Additionally, a One Person Company can hire 15 directors.

  • Separate criminal entity

As per the rules and law of the principal Act, an organization and its directors and members are separate entities.

  • Ease to form & Free from compliances

It is very easy to form a One Person Company with minimal documentation. Furthermore, there is no mandatory annual standard or other usual compliances.

  • Best desirable for start-up

The One Person Company facilitates start-ups to test their business model with no trouble and after building a profit-making product they can take help from angel investors, undertaking capitalists for funding with this an entrepreneur without facing any trouble can convert their One Person Company into multi shareholder Pvt. Ltd. Company.

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Further visit: 7 Ways to Create Great Customer Experience Strategy

  • Better than proprietorship

A one-person company registered as per the Company Act of 2013 has a separate legal entity and is measured as trustworthy compared to a proprietorship.

In the case of a proprietorship firm, the liability is unlimited and the lenders can even take hold of personal assets such as houses, private financial institution accounts, and many others which can be used to settle the business settle losses and other liabilities.

  • Less hassle

Companies are required to hire statutory auditors, conduct meetings but a one-person company is not required to follow any of these. In an OPC board meetings are not needed.

No minimum capital required to register a One Person Company

Earlier, the shareholders needed to pay at the very least Rs 1 lakh as a subscription amount to include a personal limited enterprise.

Looking at this amount, many start-up companies chose to interchange to a sole proprietorship. Now, the government has distributed with the minimal capital criteria, that is, now an organization may be included with ZERO capital.

But yes, the organization will want capital to run a business. Therefore, it could boom its capital in destiny in line with the requirement of the business.

Conclusion

The Companies Act of 2013 introduced the concept of One Person Company. Under section 2 (62) of the Companies Act, a one-person company is defined as a company formed with only an individual who is director and as well as owner of the company, unlike other forms of business structures where the minimum requirement of members and director is two.

If you are planning to launch a start-up, One Person Company Registration is the best option if you don’t have a partner.

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