Formation of One Person Company

Once you launch a business, you should also choose the right company structure for your business. This structure will enable business growth and therefore bring in more revenue. However, it’s vital that we first understand the different types of businesses in the country.

• One person company or sole proprietorship 
• Limited liability partnership (LLP) 
• Private limited company
• Public company

A one-person company (OPC) is best suited for people who wish to be solo entrepreneurs. Sole proprietorships, interestingly, offer the same benefit. However, unlike sole proprietorships, an OPC offers limited liability and the status of a separate entity, along with a better standing in the market (increased trust and respect).

To set up an OPC, the following criteria has to be met

• The person launching the OPC must be a citizen and resident of India
• The individual must have a nominee
• There can only be one shareholder and director
• The entity must have an average turnover of no more than Rs 2 crore for preceding three years
• The authorised capital cannot exceed Rs 50 lakh

Advantages of an one person company registration

• It is a legal entity separate from its member
• Single member takes all decisions
• Other businesses require more than one member 

Procedure to Start an OPC registration

• Obtaining a DSC: As incorporation is now done online, the director’s signature is needed on electronic documents. To make this possible, the director in the OPC company needs a Class-II Digital Signature Certificate (DSC). This is available from a vendor of any one of the six Certifying Authorities appointed by the MCA, including Tata Consultancy Services, nCode and e-Mudhra. The rates of their vendors could differ vastly. Charges would include the cost of the physical USB token and the certificate itself.

Documents to submit 

1. Hard copy of completed Class-II form
2. Identity Proof: Self-attested copy of PAN card or, in case of foreign national,    copy of Passport
3. Address Proof: Self-attested copy of (any one) Passport/Election/Voter ID/Ration Card/Driver’s License/Utilities Bill/AADHAR Card

• Obtaining a DIN: The Director Information Number (DIN) is how the MCA identifies directors of the company. Anyone over the age of 18 can apply. Citizenship doesn’t matter. This can be done online on payment of Rs 500.

Obtaining a DIN is done in the following way:

1. Download Form DIR-3 from the MCA website.
2. Indian and foreign nationals can apply, but there is one difference between the details required: the former would need to provide PAN, while the latter need to provide a Passport number. A soft copy of a Passport-sized photograph is also required. Ensure you don’t make common errors while filling this form.
3. Identity proof: A soft (scanned) copy of the PAN card or, in the case of foreign national, a passport is required. 
4. Residence proof: A soft (scanned) copy of (any one) Driver’s License/Passport/Voter Card/Ration Card/Utilities Bill/Bank Statement. The last two of these should be no more than two months old. In the case of a foreign national, it should be no older than 12 months.

• Search for Company Name: You don’t need to wait for the DIN to begin this process. In fact, given how tricky it can be, it’s best that you start it as soon as you apply for DSC. The reasons are that the name you’ve hoped to get for your company may violate the rules set by the MCA, may have been taken by another company and may conflict with any pre-existing trademarks.

• Name approvals: The RoC requires you to submit form names in Form INC-1. Each time you submit this form, you pay Rs1,000. If the names you’ve suggested are rejected the first time, you may resubmit once (within 15 days) at no cost. However, if they’re rejected once more, you would need to pay again.

• Drafting MoA and AoA: Once the name is approved, the MCA requires further definition of the proposed company. These will be provided through the Memorandum of Association (MoA) and Articles of Association (AoA), which can be drafted by a CS or lawyer. In the MoA, remember to paste the exact Main Objects approved in INC-1. If even a word is changed, the RoC has the power to reject your application.

• Filing e-forms: Once this is done, you will need to carry out the final process, which involves submitting the following documents

• INC-7, which is the main application for incorporation.
• The following documents need to be attested by a full-time CS:
• Memorandum of Association
• Articles of Association
• Declaration of Profession in INC-8
• Copy of utility bill no older than two months
• Copy of PAN card/Passport
• Affidavit from the subscriber to the Memorandum in Form INC-9
• Verification of signature of subscribers (Form INC-10, in case company has no share capital)
• INC-22, which states the location of the registered office
• Proof of registered office address (Conveyance or sale deed, in case property is owned, or rent receipt) Residential or commercial real estate, so long as it is in India No-objection Certificate from owner of the property
• DIR-12, which contains information regarding the appointment of the directors and key personnel of the company
• Letters of appointment of Directors, CEO, Managers
• Declaration by first director in INC-9
• Declaration by appointee director and managing director in Form DIR-2

• Payment of fees: RoC fees and stamp duty need to be paid at this stage electronically. RoC fees change according to authorised capital fee and stamp duty varies by location. In certain states, such as Punjab and Kerala, it is costlier than in others. You can calculate the fees to be paid on the MCA website.

• Verification from RoC: The RoC will verify the documents. If any changes are needed, you will be notified of the required changes. If it’s all clear, you shall receive the certificate of incorporation within 7 to 8 days. On final approval, the Certificate of Incorporation is e-mailed to the directors. The MCA now only issues digital certificates. You can print out the incorporation certificate if you wish.