Starting a business is the toughest decision one can take but it gives you the maximum fulfilment of your dreams and desires. Your decision to begin your entrepreneurial journey starts with the decision of selecting the right business structure to follow. One Person private Limited Company can be chosen to build a scalable business. It’s one of the most famous legal structure for the business preferred after private limited company, like any other company it also have multiple benefits such as limited liability, separate legal entity, ease in share transfer etc.
Earlier, there was no provision for a single person to start a company on its own without the involvement of any other person. In order to encourage and support entrepreneurs who do not want to involve any other person as an economic entity, the concept of OPC was set in motion through the Companies Act, 2013 under Section 2(62). Under OPC one can avail the benefits of a sole proprietorship and company.
The biggest advantage of OPC is – that there can be only one member as sole owner who will be responsible for all the economic and organization decisions. It is mostly preferred for the micro-businesses.
Similar to private limited company, an OPC also have a capital requirement. This capital is introduced by the shareholder. The capital amount can be introduced in two forms -
- Authorized share capital
- Paid up capital.
The minimum amount of authorized share capital, with which a company can initiate the registration process, is 1 lac INR. However, there is no minimum cap on limit of paid up capital.
An OPC private limited company also has a certain set of rules and guidelines which are confined in MOA and AOA. Memorandum of Association (MOA) and Articles of Association (AOA) are the master documents of the private limited company determining the guidelines, mutual rights and duties between directors and shareholders. MOA comprises of 6 clauses
- Name clause – under this the name of the company is specified. The name is selected as per the Rule 8 of Companies Act, 2013. It should not be identical to any existing company’s name or with any trademark.
- Registered Office clause – This clause helps to determine the state jurisdiction of Registrar of Companies.
- Object clause – In this clause, one defines the object of the company. The object comprises of all the activities or work to be carried in the organization. The company involve in any activities outside their company’s object.
- Liability clause – under this clause, the liability of the shareholders is defined. In case of the company limited by shared, the liability of the members or the shareholders is restricted by the amount each member has agreed to contribute.
- Capital clause – This clause defines the maximum number of share the company can issue
- AOA (articles of association) defines the set of rules and regulations for the management. It lays down the internal guidelines to be followed in the organization.
Is a One-Person Company right for you to start?
If you want to have full control over your business with limited liabilities, then OPC is the best choice to start with. But ensure that you convert your business structure (within six months) to the private limited company after crossing an average turnover of 2 crores over three consecutive years or has a paid-up capital of over 50 lakhs.