Business Registration Tips: Weigh-in All These Risks Before Establishing an OPC in India
Millennials are tired of doing an inflexible job and are on their way with their startup ideas. Among the many popular types of companies, a One Person Company has been of the most preferred type. As per section 2(62) of companies act 2013, a One person company is defined as a company having only one person as its member. If you establish an OPC in India, you get several big-time advantages. Still, nothing comes without any downsides. A one person company’s disadvantages discussed below.
Common Downsides of Establishing an OPC in India
- Limitations on Membership
- In a One Person Company, there can be only one member at a time.
- A minor cannot be the member or nominee of an OPC, neither can he hold shares with beneficial interest.
- Only someone who is naturally Indian and is a resident of India is eligible to be a member or nominee of a One Person Company.
Things to Consider before you Establish an OPC in India
Succession after Death of the Member
Since an OPC is treated as a legal entity, it is created for perpetual succession i.e. continuation of the company even after the demise or retirement of its member The nominee succeeds as a new member but it hardly brings any success to the company. Someone who has not been aware of the everyday functioning of the company will not be able to take on all the responsibilities. It may result in the downfall of the firm.
Feasible for only Small Business
The business structure of One Person Company is feasible for only small scale businesses. The maximum paid-up share capital of a One Person Company is 50 lakhs and the turnover is 2 crore. A company’s converted into a private limited company If the limits exceeds. Hence, it is suitable for small scale businesses with limited growth.
Unclear on the control
The difference between the ownership and control in a One Person Company is vague and this may lead to unethical business practices.
One person company cannot participate in Non-Banking Financial Investment activities such as investing in securities of someone else’s corporations.
Under Section 8 of the company’s act, 2013, One Person Company can not be incorporated into a company.
Limitations on incorporation
- NRIs can not incorporate a One Person Company in India
- A person who is already a member of a One Person Company is not eligible to incorporate or become a nominee of another company.
- It is an absolute necessity to appoint a nominee in order to incorporate a company.
If you are looking to set up your own business but you are not sure where to begin and how to proceed, just reach out to those who do. 3ECPA India has a team of experts having experience, and resources that you require to successfully incorporate in India. We have an in-depth understanding of the incorporation policies of India and can help you in establishing your business and plan out the strategies to lead towards success. Contact us via email to seek our assistance to establish one person company in India.