One Person Company

Career and Investment Planning

Entrepreneur Journey

We will be explaining about the One Person Company in this article in continuation to our entrepreneur journey articles under Career and Investment Planning Series.

One Person Company is the type of company, introduced by the Indian Government recently under The Companies Act, 2013. It requires only one director to incorporate. It is introduced to protect and manage sole proprietor business.  

Features of One Person Company 

• Business Owner as director or member can enjoy benefits of both sole proprietorship and company. 
• It provides protection to the business owner because he has limited liability towards company. For example, one may sue the company, not the business owner individually in case of any dispute. 
• It requires some compliance to be followed, being incorporated with the Ministry of Corporate Affairs. 
• Business Owner as director or member of the company solely owns the whole company. He is the only shareholder of the company. 
• Business Owner can nominee any person for the operation of the company who will be in-charge of operations or be next business owner in case of any event like death of the business owner. 
• It has restrictions on fund raising as well. one cannot raise funds by allocating shares of the company to another person because of its nature. 
• It is suitable for small businesses as it has a threshold limit of fifty lakh rupees over share capital or two crore rupees annual turnover for the preceding three consecutive financial years. Once the above-mentioned threshold limit exceeds, it mandatorily requires conversion into private or public company. 
• There are restrictions on the types of business which can be operated under One Person Company. 

Formation Procedure 

• It requires one person as business owner or director or member of the company and one person as nominee of the company. Only natural person who is Indian Citizen and resident in India, shall be eligible to act as member and nominee of the company. Resident in India means that the person has stayed in India for period not less than one hundred and eighty-two days during immediately preceding one financial year. 
• Digital Signature Certificate (DSC) needs to apply from applicable competitive authorities. 
• You will apply Director Identification Number (DIN), once Digital Signature Certificate (DSC) is received. It is basically a registration number generated for every director. It will be used for director’s related applications and compliances. 
• You will apply for reserving company name once Digital Signature Certificate (DSC) and Director Identification Number (DIN) is received. You will get your choice of entity name subject to name availability and the priority defined in the application. You will apply for its allocation with following documents within the 30 days of name reservation, once your company name is reserved: 
  • Memorandum of Association
  • Article of Association
  • Appointment of Nominee 
  • Proof of Registered Office Address
  • Declaration and Consent
  • Compliance Certificate 
• You will receive Certificate of Incorporation (COI) carrying its Company Identification Number (CIN), Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) Once your name allocation is approved.

Post Formation Procedure

• You will arrange Company Stamp, once the Certificate of Incorporation is received. Then, you need to open bank account in the name of Company. 
• You also need to apply for applicable registration as per requirement of your business operations for example: 
  • Goods and Service Tax Identification Number (GSTIN) 
  • Food Safety ad Standard Authority of India Registration Number (FSSAI Number) 
  • Trade License Number 
  • Real Estate Regulatory Authority Registration Number (RERA Registration Number)
  • MSME Certificate, If your entity is Micro, Small & Medium Enterprise.

As an individual, you may find it difficult to handle all the operations related to company formation. Hence, now it is time to apply simple strategy which we have explained under General Management Application article under What It Takes To Be Successful series that’s

. So, hire a Chartered Accountant (CA) / Certified Management Accountant (CMA) to handle company formation formalities. 

We have already explained the features and formation procedure of One Person Company in this article. Now, we will be explaining in detail about Limited Liability Partnership and its incorporation procedure in an upcoming article of the Career and Investment Planning Series.