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Are you a Foreigner, NRI, or even an Indian looking to establish a company in India? Then this blog is for you.
Entrepreneurship in India is evolving rapidly. Many individuals today want to start their business journey without necessarily having multiple partners and enjoy the benefits of limited liability, a separate legal identity, and a formal corporate structure, while maintaining complete control of the business.
To support such entrepreneurs, the Companies Act 2013 introduced the concept of an OPC (One Person Company). With amendments in 2021 by the Ministry of Corporate Affairs (MCA), OPCs have become even more flexible — Non-Resident Indians (NRIs) can now incorporate OPCs in India. The residency period has been reduced from 182 days to 120 days, and various other benefits have been introduced.
In this article, we will cover all the crucial aspects of operating and registering an OPC in India under the Companies Act 2013.
Understanding What an OPC is?
According to section 2(62) of the Companies Act 2013, a One Person Company is a company with only one member.
Here, the term member in the above definition refers to a person who is:
- A subscriber to the Memorandum (the original founders).
- Any person who agrees in writing to become a member is recorded in the Register of Members.
- Any beneficial owner (A person holding shares of the company) whose name appears in the records of a depository (for Demat shares).
In simple terms, an OPC is a company established by a single person who holds complete control over its operations and management.
This single individual fulfills all the roles mentioned above, acting as the founder, owner, and shareholder. One individual is the sole member and shareholder.
Difference between Sole Proprietorship and OPC
Many people often misunderstand both terms, One Person Company (OPC) and Sole Proprietorship, as they sound similar and convey the same meaning in some sense, but there is a big difference between them. Let’s understand:
| Point of Difference | Sole Proprietorship | One Person Company (OPC) |
| Legal Status | Not a legally recognized entity under the Companies Act; just an individual doing business. | A legally registered entity under the Companies Act, 2013. |
| Registration | Not formally required but may need other business licenses. | Mandatory registration under the Companies Act, 2013. |
| Liability | Unlimited liability – the owner is personally responsible for all business debts. | Limited liability protection – owner’s personal assets are protected. |
| Compliance Requirements | Minimal compliance and paperwork, genrally related to filign taxes by the individual. Taxed at individual slab rates. | Moderate compliance – annual filings, audits (in some cases), and statutory records., taxed at corporate tax rates. |
Key Features and Benefits of an OPC
If you’ve ever wanted to run your business independently yet enjoy the perks of a registered company, OPC is designed just for you. Here’s why incorporating an OPC in India can be a smart move for modern entrepreneurs. We have categorized all the Key features and benefits into three categories, which are mentioned below:
Legal and Financial Advantages:
1. Limited Liability Protection
The liability of members/shareholders is limited to the amount of capital contributed by them. Which clearly means your personal assets remain safe in case of business losses or insolvency.
2. Separate Legal Identity
An OPC is a separate legal entity, which means the company is considered to be an artificial person here, which means it can own property, sue, and be sued in its own name.
3. Perpetual Succession
The business continues to exist even if the owner passes away or becomes incapacitated, because of the mandatory nominee provision for the formation of a One Person Company.
Operational and Management Advantages
1. Easier and Faster Formation
The process of incorporating an OPC is more straightforward and requires less documentation than other company structures.
2. Ease in Management
Only one person acts as both shareholder and director, ensuring complete decision-making power. This eliminates potential conflicts or delays that can arise when multiple partners or shareholders need to reach consensus, enabling faster, more agile responses to market conditions.
3. Ease of Compliance
If we compare to private limited companies, OPCs are exempt from several stringent compliances and secretarial requirements under the Companies Act 2013. Let’s; understand these compliances which OPCs are exempt from:
- Relaxed board meeting rules: OPCs are required to hold only one board meeting in each half of the calendar year, with a minimum gap of 90 days between the two meetings. If the company has only one director, no board meetings are required
- No annual general meetings: They are not required to prepare or file any AGM-related reports or documents to ROC
- No need to prepare cash flow statements: OPCs are not obligated to include a cash flow statement in their financial statements, reducing documentation and compliance burden
Note: relaxed board meeting rules (u/s 173), no annual general meetings (u/s 96), no need to prepare cash flow statements (u/s 40)
MSME and Tax Advantages
1. MSME Benefits
OPCs can register under MSME schemes and apply for government tenders. They can easily avail themselves of opportunities not available to a Sole proprietorship.
- Priority Sector Lending: Access to collateral-free loans up to a specific limit (e.g., ₹1 crore) from banks and financial institutions, often at lower interest rates
- Government Tenders and Procurement: Registered MSMEs receive a price preference (up to 15%) and are eligible for government procurement schemes, with 25% of government purchases reserved for MSMEs
- Protection Against Delayed Payments: Under the MSME Development Act, 2006, an OPC can charge interest (three times the RBI bank rate) on payments delayed beyond 45 days
- Subsidies and Reimbursements:
- Substantial subsidy (50%) on patent and trademark registration fees
- Reimbursement of expenses for ISO certification and technology upgrades
- Startup India Benefits: If the OPC is recognized as an eligible startup by the Department for Promotion of Industry and Internal Trade (DPIIT), it can avail a 100% tax exemption on profits for three consecutive years
- Reduced Compliance Burden: MSMEs enjoy simplified regulatory and tax compliance systems, allowing business owners to focus on core operations
2. Various Tax Benefits:
- Lower Corporate Tax: Companies with a turnover of up to ₹400 crores can be taxed at a concessional rate of 25%. Under a specific regime, OPCs can opt for an even lower flat rate of 22% (effective rate of around 25.17% with surcharge and cess), provided they forgo certain deductions. This is often more favorable than the personal income tax slabs that can go up to 30%.
- Deduction of Business Expenses: OPCs can deduct legitimate business expenses from their taxable income, which significantly reduces the tax burden.
- Key deductible expenses include: Director’s salary (paid to the owner), Office rent and utilities, Employee salaries and professional fees etc. Exemption from Minimum Alternate Tax (MAT): Eligible OPCs, such as those that qualify as startups, may be exempt from MAT or can carry forward MAT credit for up to 15 years
- Presumptive Taxation Scheme: OPCs with an annual turnover up to ₹ two crores can opt for the presumptive taxation scheme under Section 44AD of the Income Tax Act, where income is calculated at a pre-determined percentage of turnover (usually 8%), simplifying compliance
- GST Benefits: OPCs registered under GST can claim input tax credit (ITC) on business-related purchases and, if eligible, opt for the composition scheme to pay GST at a lower rate with simplified quarterly filing
Key Requirements
According to the law, incorporating an OPC in India requires fulfilling the following requirements:
| Requirements | Details |
| 1. Member of a Company
|
An OPC can have only one owner, called the member. This person must be:
|
| 2. Director of a Company | An OPC must have at least one director who manages the company’s day-to-day decisions and legal responsibilities. In an OPC, the same person can be both the owner (member) and the director.A company can have up to 15 directors, and this number can be increased if the company passes a special resolution. |
| 3. Minimum Capital Requirement | Authorized Share Capital: The maximum amount of share capital that a company is legally permitted to issue to its shareholders, as stated in the MOA.
The authorized share capital shall be specified in the company’s capital clause during registration, which can be increased later if needed by making mandatory changes in the MOA by passing a special resolution and ROC filing. There is no minimum authorized share capital for an OPC. Paid-up Share Capital: It is the actual amount of money a company receives from shareholders in exchange for shares. There is no minimum paid-up capital requirement for an OPC. However, there is no minimum paid-up capital required, but you need it for registration purposes, or mainly for the bank account opening. That’s why you need to maintain a basic amount for a current account opening in banks in India. |
| 4. Nominee Requirement
|
Due to the single-member structure, the sole member must appoint a nominee, a natural person who will become a member of the company in the event of the original member’s death or incapacity.
A nominee must be appointed during incorporation, with their consent obtained in the required form. Nominee’s consent (Form INC-3) |
| 5. Documents Requirement
|
To register an OPC, the following general documents are needed:
|
Steps To Register an OPC
To register your One-Person Company in India, you need to obtain approval from the MCA (Ministry of Corporate Affairs) and comply with the detailed procedure of incorporation mentioned u/s 7 of the Companies Act 2013. Let’s understand the general steps based on the categorization of pre- and post-incorporation:
Pre-incorporation Steps:
Step 1: Obtain a Digital Signature Certificate
This is a certificate that is required to be electronically signed by the proposed director and shareholder of the company.
Step 2: Obtain Director Identification Number (DIN)
Apply for this unique identification number for the proposed director. The DIN application is now integrated into the SPICe+ form.
Step 3: Appoint a Nominee
A nominee must be appointed, and their consent needs to be obtained in Form INC-3.
Step 4: Filing and incorporation
- Name reservation: Apply for a unique name for the company through Part A of the SPICe+ form on the MCA portal.
- Prepare documents: Draft the Memorandum of Association (MOA) and Articles of Association (AOA). Also, gather documents for the registered office and proof of identity and address for the director.
- File the SPICe+ form: Fill out Part B of the SPICe+ form and attach all the required documents, including the MOA, AOA, director’s declaration (Form INC-9), and consent (Form DIR-2).
- Submit to MCA: Submit the completed SPICe+ form to the Registrar of Companies (RoC) along with the necessary fees and other relevant forms mentioned below.
Earlier, company incorporation required physical visits to the ROC and was a lengthy process. Today, it is fast and fully online through the MCA portal—provided you follow every step as per the Companies Act. Any incorrect or misleading information, even if unintentional, can result in penalties.
Thats’ why It is important to understand the complete procedure carefully before applying for registration online. For more updates or professional assistance with the incorporation process, you can also contact us.
Post-incorporation:
- Receive Certificate of Incorporation: Once the RoC approves the application, it will issue the Certificate of Incorporation, which officially registers the OPC. It is very important, as without this you cannot commence your business activity as a registered company. It is as important as an Aadhaar card for a citizen of India as it is the identity of a company
- Allotment of PAN and TAN: After incorporation, the company will be automatically allotted a Permanent Account Number (PAN) and a Tax Collection and Deduction Account Number (TAN).
- Filing of RoC Compliance: There are certain mandatory forms required by the ROC after successfully registering your OPC in India. Let’s understand these forms:
| Purpose | Form | Deadline |
| Commencement of Business Declaration | INC-20A | Within 180 days of incorporation (after depositing share capital) |
| Registered Office Verification | INC-22 | Within 30 days of incorporation (if the address wasn’t filed in the SPICe+ form) |
| Consent of Nominee | INC-3 | Filed at the time of incorporation (part of the SPICe+ process) |
| Particulars of Directors & KMP | DIR-12 | Within 30 days of the appointment or changes. Also filed annually by September 30 for every director with a DIN. |
Annual and Event-Based Compliance
| Purpose | Form | Deadline |
| Filing Financial Statements | Form AOC-4 | Within 180 days from the end of the financial year. |
| Filing Annual Return | Form MGT-7A | Within 60 days of the adoption of financials |
| Appointment of First Auditor | Form ADT-1 | Within 30 days of the appointment, which must be made by the Board within 30 days of incorporation |
| Return of Deposits/Outstanding Loans | DPT-3 | Annually by June 30 for all outstanding loans. |
| Half-yearly Return for MSME Dues | Form MSME-I | Half-yearly Return for MSME Dues |
Key Changes under Amendments of 2021
There were certain changes introduced by the MCA in 2021 regarding the setup of a One Person Company (OPC) in India. Let’s understand all the key updates:
- NRI eligibility: The 2021 rules now permit Non-Resident Indians (NRIs) to incorporate OPCs in India
- Reduced residency requirement: The period an Indian citizen must have stayed in India to be considered a resident has been lowered from 182 days to 120 days
- Conversion flexibility: The mandatory two-year waiting period after incorporation for converting an OPC into a private or public company has been removed
- Elimination of conversion thresholds: The previous requirement to convert if paid-up capital exceeded the threshold of ₹50 lakh paid-up capital or ₹2 crore average turnover limit has been removed
- Streamlined forms: E-forms related to OPCs have been rationalized, including the modification of e-form INC-6 for conversion applications
Conclusion
Whether you are an Indian citizen, a foreigner, or an NRI planning to start a business in India, understanding the legal requirements, the incorporation process, and ongoing compliance is essential for smooth, long-term business operations.
At Mercurius, we help businesses of all sizes incorporate their company in India and support them in successfully growing their operations. Our services are not limited to company formation—we provide end-to-end assistance, including accounting and bookkeeping, auditing, tax filings, HR-related services, and a wide range of legal and compliance advisory services.
If you need any assistance regarding company setup or related services, you can also book a free consultation with our professionals.
