A one person company is a company which contains exactly one member. It is a separate legal entity from its promoter and the promoter has limited liability.
Entrepreneurs who are capable of starting a venture on their own can make use of one person company (OPC) in India. In one person company, there is only one shareholder who is an Indian citizen and Indian resident i.e. stayed in India for at least 182 days in the preceding year.
Shareholder nominates another person as a nominee in case of death or incapacity of the shareholder. One person company was introduced in the companies act in 2013 to encourage self-employment. You can not incorporate more than one person company or be a nominee of more than one OPC. Rules of OPC company do not permit Non-Banking Financial Institutions.
An affidavit from every subscriber of the memorandum (i.e. members) and first directors, if any, that they have not been convicted of any offence in relation to the formation or management of any company, or have not been found guilty of any fraud or any breach of duty to any company during preceding five years. One Person Company in India is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder.
Many times startups need to borrow money and take things on credit. In the case of normal Partnerships, Partners personal savings and property would be at risk in case business is not able to repay its loans.
The OPC business helps Startup Entrepreneurs to easily test their business model, and upon building a marketable product, they can approach Angel investors, Venture capitalists for funding and easily convert their OPC into multi shareholder Private Limited company.
In India, OPC is a Private limited company, which is a popular and well-known business structure. Corporate Customers, Vendors and Govt. Agencies prefer to deal with Private Limited Company instead of proprietorship firms.
This leads to fast decision making and execution. Yet OPC can appoint as many as 15 directors for administrative functions, without giving any share to them.
OPC is one of the easiest forms of corporate entities to manage. Very few ROC filing is to be filed with the Registrar of Companies (ROC). No need to conduct Annual General Meeting (AGM) and other regular compliances.
OPC Company is easy to sell, very less documentation and cost is involved in selling a One Person company.
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