A company that is formed with a single person as a shareholder and director is known as a one person company. In India, the concept of a one person company is relatively new. This concept was launched by the Companies Act in order to encourage various small businesses and entrepreneurs to set up companies of their own. A natural person who is a citizen of India and is an Indian resident can form a one person company also known as an OPC. In this blog, we will discuss the eligibility criteria for the formation of an OPC a.k.a. A One Person Company.
But first, let's discuss a One person company a.k.a. An OPC. A separate legal entity is provided by OPC. The individuals also get to enjoy limited liability. An OPC permits the Individuals to continue their business without the need of any partner of a board of directors. The concept of both a private limited company and a one person company are quite similar but OPC has less requirements for compliance.
However, the number of OPCs that can be formed by a person is restricted and the paid-up capital and turnover is also limited to a certain amount. An OPC will have to be converted into either a public or a private limited company in case the turnover or the company becomes more than Rs. 2 Crores or in case the paid-up capital of the company becomes more than Rs. 50 Lakhs.
Simply put, OPC is one of the most preferred options for solo entrepreneurs who wish to start their own business and want to gain benefits but do not want to work with any partners.
A natural person who is an Indian citizen and an Indian resident can form a one person company by meeting the following eligibility requirements:
In addition to this, some businesses can not be opted as a one person company like non-profit organisations, financial institutions, banking institutions and companies which are engaged in activities related to investment in securities.
As discussed before, an OPC can be formed only by a natural person who is an Indian resident and an Indian citizen. Any non-resident or a foreign national is not qualified to form a one person company.
In this blog, we discussed in detail a one person company also known as an OPC and the eligibility criteria to form an OPC. We also discussed some additional conditions for the formation of a one person company.