One Person Company (OPC) was recently launched as a sole proprietorship refinement. In OPC, the sole promoter acquires full rights over the company, thus restricting his / her liability to their contribution to the enterprise. Therefore, stated that the person will be the sole shareholder and director (however, the director nominee is present, but has zero power until the actual director proves unable to come to an agreement). Also, there may be no opportunity for the employee to contribute to stock options or equity funding. In addition, if an OPC company has an average hat trick turnover of Rs. 2 crore and above or Rs. Lakh 0 lakh and above, it has to be converted into a private limited company or a public limited company within six months.
Giving the Union Budget 2021-22, Finance Minister Nirmala Sitaram on Monday proposed a change in the definition of small companies under the Companies Act. Companies with paid up capital of up to Rs 2 crore and turnover of up to Rs 20 crore will come under smaller companies. Earlier, the capital limit paid within this threshold was Rs 50 lakh and turnover was up to Rs 2 crore. This compliance is for the benefit of more than 2 lakh companies in complying with the requirements.
The budget reduced the stay of NRIs from 182 to 120 days to make room for norms around the establishment of One Person Company (OPC). Previously, only Indian resident citizens were allow to form one person company in India.
OPC is a company own by one person. Other countries where the concept is legal are UK (2006), China (2005), Turkey (2012), and Pakistan (2003).
“Allowing NRIs to invest this way can encourage established small and medium-sized businesses without having to worry about large compliance frameworks or minimum capital commitments,” says Moin Lada, a partner at Khaitan and Part.
In India, it came into existence on May 31, 2005 by a committee headed by Dr. J. J. Ira and aimed at contributing to the entrepreneurial spirit of India in the economy. Therefore, this helps individual organizations like small traders, artisans and other service providers to give a spotlight to financial institutions and encourage aspiring entrepreneurs.
Under the Companies Act, 2013, the OPC is a separate legal entity and will be required to register for a permanent successor. Here, the obligation to repay the loan taken by the OPC falls on the OPC as opposed to sole proprietorship.
Among the advantages, one can say that the OPC is free from strict legal compliance such as board meetings, inclusion in the financial statement, quorum, and mandatory rotation of a determiner.
The legal status of the OPC also lends itself when it comes to borrowing from any of the banks as compared to sole proprietorship. In July 2013, the Reserve Bank of India directed all Scheduled Commercial Banks to provide financial incentives to priority sectors, namely, agriculture and small scale industries. Over the years, OPC has entered other fields including construction, mining and mining, electricity etc.
OPC formation in bangalore has a separate legal entity. In the eyes of the law, a company is a person who has a common seal, and is a successor forever. He has the right to use all the functions of the person involved.
Unlike a public limited company and a private limited company, the concept of limited liability of a one person company in India suggests that the liability of the member shall be to the extent of his share in the company. In OPC, an individual has a full stake and has full authority over the management of the business. Therefore, it can be clarified that the liability of the person will be to the extent that he has invested in the business.
An OPC will have its own separate property as it has its own identity and acts as a separate legal entity. The OPC will own its assets, and the members will have no insurable rights to the company’s assets.
OPC registration in Bangalore has only one shareholder. The issue of transferring part of the shares does not arise at all because if it is done, the company will stop being a “one person” company. The transfer of all shares is also not practical as it will change the whole structure of the company as the owner of the company changes. The issue has been deal with, and the interpretation of the law may lead us to clarify that in the OPC, the transfer of shares is not permitted.
OPC enters into valid agreements with its shareholders or directors. This means that as a director you can get payment, you can get rent with less rent, as a creditor you can uplift money in your own company and earn interest. The remuneration, rent and interest of the directors are deductible expenses which reduce the profitability of the company and ultimately bring down the taxable income of your business.
OPC is fully control and operate by a single owner. It leads to quick decision making and execution. A sense of belonging inspires the business to grow further.
One person company is the most popular business structure in the world. Larger organizations prefer to deal with private limited companies rather than proprietary firms. The private limited business structure enjoys a corporate status society that helps the entrepreneur to attract a quality workforce and retain them by giving them corporate positions such as directorship.
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