One Person Company (OPC) came into existence with the sole purpose of encouraging the entrepreneurs to start their own company as a single owner. But you must not confuse it...
Introduction:The number of business entrepreneurs in India has been considerably increasing since the last two decades. When it comes to doing business independently, the best option opted by entrepreneurs is either Sole proprietorship or One-Person company (OPC). People often get confused with these two terms and use them interchangeably. However, these two terms are different from each other.
A Sole proprietorship is one of the oldest forms of doing business. It is run and managed by a single person. A Sole Proprietorship doesn’t enjoy a separate legal status from its owner. The sole proprietor is personally responsible for all the debts of the business. There is no further scope for extension of the business to operate it on large scales. This is suitable for carrying on business on a small scale.
One Person Company (OPC) is a new form of business, which was introduced by the Companies Act 2013. This form has the features of both Sole Proprietorship and a Private Limited Company. A One Person Company enjoys a separate legal status from its owner. It is run and managed by one person. One Person Company requires only one director and one shareholder.
Is there any specific law and procedure of registration?
A Sole Proprietorship is a popular form of unregistered business. It does not require any registration as it is considered as an extension of the business of the owner.
Hence, it is not governed under any specific la and there are no specific procedures for its registration. However, the sole proprietorship business can be established through opening a Bank account and obtaining registration under different acts like GST, MSME etc
On the contrary, the Companies Act 2013 governs a One Person Company hence its registration is mandatory under the said act. The procedure laid down under the Companies Act 2013 and Rule 8 of Companies (Incorporation) Rules, 2014 has to be followed for registering a One Person Company. The One Person Company has to be first registered as a Private Limited Company. Further, it can proceed for registrations under different Acts.
Given below is a detailed comparative analysis between the registration processes of these two forms of business:
Procedure for registration of Sole Proprietorship:
- The sole proprietor has to first apply for obtaining his Aadhar card and PAN card. Scanned photographs, address proof, and ID proof are required for obtaining Aadhar and PAN. These two documents are mandatory for opening bank accounts, further registrations and filing Income Tax Returns.
- Bank Account: After obtaining the Aadhar Number and PAN, you can visit any bank for opening an account for the sole proprietorship. A few additional documents like ID proof, address proof and photographs will be required for opening the bank account.
- Proof of office
1. For rented property: Rent agreement and No Objection Certificate from the landlord.
2. For Self-owned Property: Any utility bill or property documents.
- Registration under the MSME Act: One can also obtain MSME registration under the MSME Act. MSME registration is not mandatory but it is highly beneficial. The government runs certain schemes for Small and Medium Enterprises, which are entitled to receive various privileges over large scale enterprises.
- Shop and Establishment Act License: Shop & Establishment Act License is to be obtained in cases when the subscriber intends to operate any store or factory or any of such business place. Although registration is not mandatory in all places. It varies from state to state.
- GST Registration: If the annual turnover is more than Rs. 20 lakhs, then the sole proprietorship should obtain GST registration under the GST Act. It is also mandatory if you are doing online business (selling through Amazon, Flipkart etc.), GST registration can be obtained through filing an online application in gst.gov.in and submitting the following documents
- PAN card, Photo and Aadhar Card of the proprietor
- Proof of business place (Electricity bill/ rent agreement)
- Bank statement copy containing bank account no., address, and IFSC code)
Procedure for registration of One Person Company
- Application for Digital Signature Certificate (DSC): This is the first and foremost step for registration of a One Person Company (OPC). The director to be appointed has to first obtain a Digital Signature Certificate (DSC). A DSC is used for digitally signing forms and documents. The required details and docs for obtaining a DSC are ID proofs, Address proofs, Pan
- Name Approval Application: Before proceeding with the process of One Person Company registration, a name application has to be filed with MCA for approving the name of the One Person Company. The name of the One Person Company has to be chosen very carefully as the MCA would not allow any name which resemblances the name of any other existing entity. The guidelines laid down in rule 8 of Companies (Incorporation) Rules 2014 have to be followed before choosing the name. The name application is filed by filing the “RUN” application with MCA after paying the requisite fee.
- Documents required for registration of One Person Company: The following documents are required for filing the application forms:
- The Memorandum of Association(MoA) and Articles of the Association (AoA)
- Consent of nominee in form INC-3 along with PAN and Aadhar card. The nominee will take over the business in case of death or incompetency of the owner/member
- Proof of the Registered office of the proposed Company along with the proof of ownership and an NOC from the owner.
- Affidavit and Consent of the proposed Director of Form INC -9 and DIR – 2 respectively
- A declaration by a professional (a practicing CA, CS or Advocate) certifying that all compliances have been made.
- Filing SPICE forms with MCA: After obtaining all the required documents, SPICE forms (INC 32, INC 33 and INC 34) has to be filed with MCA by paying the requisite fee and e-stamp duty on MOA and AOA. These documents will be provided as attachments in the SPICE forms. The director has to digitally sign the SPICE forms with his
- Certificate of Registration: Once the SPICE forms are approved by the MCA, it will issue the Certificate of Registration of the One Person Company, which will contain the Company Identification number. The records of the One Person Company will be updated in the MCA records. The director will also be issued a Director Identification Number. The PAN and TAN of the One Person Company will also be allotted simultaneously, once the SPICE forms are approved.
- Bank Account: Once the Certificate of Incorporation, PAN and TAN are obtained, the One Person Company (OPC) can proceed to open a Bank Account of the Company. It is mandatory to open a current account in the name of the Company and deposit the initial capital subscribed by the shareholder.
- Once the Bank account is opened, the One Person Company (OPC) can proceed to commence its business.
Hence, it is clear that the registration process of One Person Company (OPC) and Sole proprietorship are completely different from each other. The registration process of One Person Company (OPC) is complex and lengthy as compared to that of a Sole Proprietorship. Hence, one should know all the details about the registration process before proceeding towards the same.
Now when you motivated for OPC registration, we can help you its incorporation with the Ministry of Corporate Affairs.