OPC Registration

Benefits Of OPC Registration In India

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One Person Company or OPC is a new form of business entity introduced in India by the Ministry of Corporate Affairs in 2020. An OPC allows an individual to set up a private company by themselves which can help budding entrepreneurs and professionals to start their own business venture with less legal compliances as compared to regular private companies. In this blog, we will discuss the top benefits of registering an opc registration in india in detail.

What is an OPC?

An OPC is a corporate business structure where only one individual is responsible for the liabilities and management of the company. The individual who incorporates the OPC is called the nominee director. An OPC provides limited liability to its owner which means that the personal assets of the owner are protected in case of business failure or debts. An OPC also provides flexibility to its owner to grow the business as the owner can hire employees and partners as the business expands.

An OPC is incorporated as a private company with at least one member. The memorandum and articles of association of an OPC are in a prescribed format with minimal documentation. Some key features of an OPC include- it is managed and controlled by one individual called nominee director, there is no restriction on number of employees that can be hired, and it can be converted into a private or public company anytime.

Low registration cost

One of the major benefits of registering an OPC is that it has a very low registration cost compared to regular private companies. The registration fee for an OPC is Rs. 5000 only which is much lower than registration of a private limited company which is around Rs. 15,000. Additionally, the compliance requirements are also less for an OPC which keeps the overall setup and operational costs low.

The low registration fee makes OPC very affordable for startups and small businesses. Many entrepreneurs struggle to arrange Rs. 15,000 for private limited company registration but Rs. 5000 fee for OPC is very reasonable. This low entry barrier helps new ventures to formally start their business at minimal cost. Various compliances like annual filings and maintenance of statutory registers also have lower requirements and costs for OPC.

Simple registration process

Registering an OPC is also a very simple process which can be completed online through the Ministry of Corporate Affairs portal. The documents required are minimal which include name availability check, memorandum of association, articles of association and filing e-form INC-33 with Registrar of Companies (RoC).

Digital signature of the nominee director is required which makes the whole process paperless. Within a few days of filing, the certificate of incorporation is issued making it very convenient for entrepreneurs. No publication of name is required in newspapers. Overall, it is a very streamlined process without much legal formalities and paperwork involved as compared to other forms.

No minimum paid-up capital requirement

Unlike private companies, there is no requirement of minimum paid up capital for registering an OPC. This gives flexibility to the owner to start the business without any large capital investment. Funds can be raised as per the business needs of the company.

For a private limited company, the minimum paid up capital requirement is Rs. 1 lakh which may not be feasible for many new ventures. Most startups struggle to arrange Rs. 1 lakh in initial stages. Without customers or order book, it is difficult to infuse capital. The zero minimum capital clause of OPC helps entrepreneurs to remain bootstrapped in the beginning.

One person management

As the name suggests, an OPC allows a single individual to incorporate, manage and control the company. All the responsibilities and decision making powers vest with the nominee director. This makes the decision making very streamlined without requiring approvals from partners or shareholders. The owner has full control over the business strategy and operations.

Decisions can be implemented quickly as there is no board or shareholder consent involved. The entrepreneur can evaluate opportunities and respond fast without bureaucracy. Control over key functions like finance, production, marketing etc. is centralized with one person only. This facilitates smooth functioning in the initial growth phase of business.

Ability to hire employees

While an OPC has only one member, it allows hiring of employees. This gives flexibility to the owner to scale up the business operations by recruiting skilled professionals. The owner can hire employees and delegate work/responsibilities.

This helps in expanding the business capacity without requiring additional partners or directors. An entrepreneur can leverage the expertise of employees to handle functional areas that he/she may not be specialized in. Manpower can be added based on the volume and complexity of operations.

Conversion to private company

An OPC registered owner has the option to convert the OPC into a private limited company anytime in future if the business grows substantially. All the assets and liabilities remain the same on conversion. This provides scalability without requiring to wind up the existing entity and start a new company.

The conversion process is also simple requiring just RoC filings. This allows entrepreneurs to start small with OPC structure and gradually shift to a private limited company as the business matures. Continuity of the business is maintained during this transition.

Tax benefits at par with companies

An OPC is treated as a separate legal entity distinct from its owner for income tax purposes. It is eligible for all tax benefits available to private limited companies such as deduction for expenses, losses, tax rates etc. under the Income Tax Act.

The income of the OPC is taxed at the rate applicable to companies which may be lower than personal tax rates in many cases. Deductions for capital expenditure, depreciation, research and development costs etc. are available. Losses can be carried forward for set-off against future profits. Overall, tax planning becomes easier with an OPC.

Limited liability

One of the biggest advantages of an OPC is limited liability. The personal assets of the owner/nominee director are protected in case of business failure or debts. Only the assets owned by the OPC can be liquidated to repay debts and the owner’s personal assets like house, bank deposits, investments etc. are not at risk.

This provides a big risk protection to the entrepreneur. In proprietorship, partnership or LLP structures, personal assets are at risk if liabilities exceed assets. But with an OPC, the owner’s personal wealth is fortified from business creditors.

Continuity of business

In case of death or retirement of the owner, the business of OPC continues with a new nominee director appointed. This ensures continuity of the business venture. In comparison, proprietorship firms get dissolved on death/retirement of the owner requiring fresh registration.

An OPC as an independent legal entity remains unaffected despite change of ownership or management control. This adds to the long term stability of the business. Customers and other stakeholders deal with a perpetual company rather than individuals.

Conclusion

The single person company registration provides several key benefits making it an attractive business option for startups and small businesses in India. The low compliance burden, tax benefits, limited liability and flexibility offered make OPCs very suitable for new-age entrepreneurs. Given the ease of registration process, more and more individuals are leveraging this structure to formalize their business ideas. The growth potential of OPCs is immense in the coming years.

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