One person company (OPC) is a new business structure that permits a single entrepreneur to manage a business entity with limited liability.
This concept was introduced to motivate entrepreneurs who are capable of starting a venture on their own by permitting them to create a single person economic entity. It allows a single promoter full control over the company while limiting his liability to contributions to the business. This single promoter will be the only director and shareholder in the company, though there is another director (a nominee director nominated in the MOA and AOA of the company) with no power until the original director becomes incapable of entering into a contract.
There is no equity fundraising or offering employee stock options in an OPC. It is mandatory for a One Person Company to be converted into a Private Limited Company or Public Limited Company within six months if it has a paid-up capital of over Rs. 50 lakh or crosses an average three-year turnover of over Rs. 2 crore, It must thus, file audited financial statements with the MCA like all Companies. Hence, it is significant to carefully consider the features of a OPC prior to incorporation.
One Person Company is the only business venture that can be started, managed and operated by a single director/promoter with limited liability. A corporate form of legal entity ensures that the OPC has simple ownership transferability and perpetual existence.
The directors’ personal assets are always safe irrespective of the debts of the business.
Sole Proprietorships dissolve only with the death of the director. But, OPC being a separate legal entity, would continue to exist due to the nominee director.
OPC must have its books audited annually. The Credibility among vendors and lending institutions is greater because Banks and Financial Institutions prefer providing funding to a company than partnership firms.
Section 98, Sections 100 to 111 (inclusive), shall not apply to a One Person Company and is thus, exempted from the following;