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How to form a One Person Company OPC Know How Advantages Disadvantages www.signitiv.com

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SIGNITIV CONSULTANCY PRIVATE LIMITED STARTUP BUSINESS CONSULTING SERVICES CALL: +91 7449103000 | +91 7449104000 | +91 7449105000 | +91 7449106000 WEB: www.signitiv.com EMAIL: hellosignitiv.com ONE PERSON COMPANY The Government of India had come with many new concepts to support startups and to boost entrepreneurship. As a part of this a new form of business entity One Person Company was first introduced in the Companies Act 2013. This concept was already in existence in countries like UK USA Singapore China and Pakistan but when it comes to India it is a new concept. ELIGIBILITY FOR OPC The persons eligible for establishing a One Person Company are as follows. 1.The person should be naturally born Indian and resident in India 2.The persons are not eligible those who are born in other countries 3.If a person has already opened a 1 One Person Company then he/she is not eligible to open another company. REQUIREMENTS OF OPC • Minimum one shareholder • Minimum one director • The director and the shareholder can be of the same person • Minimum one nominee

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SIGNITIV CONSULTANCY PRIVATE LIMITED STARTUP BUSINESS CONSULTING SERVICES CALL: +91 7449103000 | +91 7449104000 | +91 7449105000 | +91 7449106000 WEB: www.signitiv.com EMAIL: hellosignitiv.com ADVANTAGES OF ONE PERSON COMPANY EASY TO GET LOAN FROM BANKS Banking and financial institutions prefer to lend money to the company rather than proprietary firms. Most of the banks insist the entrepreneurs to convert their firm into a private limited company before sanctioning funds. So it will be always better to register a startup as a One Person Company. A SINGLE OWNER CONTROL The whole company can be controlled by a single owner. So it will be easy to make decision making and execution by their own. He/She can also appoint as many directors they want without giving any shares to them. SAFEGUARDS The death or disability of the sole person can be provided through the appointment of another individual as nominee director. So the nominee director will manage the affairs of the company till the date of transmission of shares. TAX FLEXIBILITY In an One Person Company it is possible to make a valid contract with the shareholder or with a directors. • As a director you can receive remuneration • As a lessor you can receive rent • As a creditor you can lend money and earn interest. This will results in the reduced profitability of the company and reduces the taxable income of your business. DISADVANTAGES OF ONE PERSON COMPANY SUITABLE ONLY FOR SMALL BUSINESS The One Person Company is only suitable for small business. It can only have a maximum paid capital share of Rs.50 lakhs.Otherwise the One Person Company should be converted into Private Limited Company.

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SIGNITIV CONSULTANCY PRIVATE LIMITED STARTUP BUSINESS CONSULTING SERVICES CALL: +91 7449103000 | +91 7449104000 | +91 7449105000 | +91 7449106000 WEB: www.signitiv.com EMAIL: hellosignitiv.com MEMBERS The One Person Company can only have a maximum no.of. one member. A minor person shall not be eligible to become a member or nominee of the One Person Company and they cannot hold any shares with beneficial interest. Only a natural person who is an Indian citizen and resident in India shall be a nominee for the sole member of the one person company. RESTRICTIONS ON CONVERSION An OPC cannot be incorporated under section 8 of companies Act 2013. An OPC is also not allowed to carry out Non-Banking Financial investment activities. An OPC can only convert into either a private or public company once the followings conditions are met: 1.The OPC must have been in existence for a minimum of 2 years 2. It must have a shared capital of Rs.5000000. 3. Its average turnover should have exceeded Rs.2 crores. Hence the newly introduced concept of One Person Company is a better option for those entrepreneurs who does not want other persons to involve in their business. So by doing the business under the One Person Company and titled as Private Limited may enhance the value of a business.