Owning a company and owning a sole proprietorship are two different things. Companies are more robust in nature and have multiple active members like directors and shareholders who contribute to making crucial operational decisions on a day-to-day basis. Moreover, it is also more flexible to operate a company than is the case with a sole proprietorship. Since there was a demand for a business type that coupled the benefits of a company and the flexibility of a sole-proprietorship, the Companies Act 2013 introduced a new kind of business entity- One Person Company or OPC.
What is a One Person Company?
Before the introduction of a one person company, an individual could establish a company with more than one member. Now, that single person who incorporates an OPC can be the shareholder, Memorandum Of Association subscriber, and founder of the company.
Can an Individual Own Multiple One Person Companies?
The rules of the companies act restrict multiple ownership of one person companies for any individual in India. In fact, if an individual opts for membership in another One Person Company, they will have a limited time period of 180 days to withdraw their current ownership from the previous one person company. If an individual becomes a member as a nominee to the prior owner, he will choose between the two one person companies and opt out of either one of them within the specified time limit.
How is an OPC Different from Sole Proprietorship?
While both one person companies and sole proprietorships have one sole member, they are different business entities for a variety of reasons. A sole proprietorship does not enjoy separate legal status as the one person company, and the personal assets of the owner here are subject to payment of any debts or loans for the firm. This is not the same with one person companies, as they are provided limited liability since incorporation. Moreover, a one person company enjoys more credibility in the market when compared to a sole proprietorship.
Who can Incorporate One Person Companies in India?
An applicant should be the following to incorporate a one person company in India:
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Natural person
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Indian citizen and resident
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Legal adult
Please note that other companies or corporations allow different organisations or entities to become members by purchasing the company's shares. However, only a natural person can become a member of a one person company. No other company or corporation can buy its shares to become a member.
Benefits of a One Person Company
One Person Companies in India enjoy certain benefits and exemptions, which are as follows:
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No need for annual meetings
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It does not require a company secretary
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A director can sign annual returns too
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Directors earn more remuneration compared to other companies
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No particular requirement to include cash flow statements in financial books
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Provisions laid down for independent directors do not apply in an OPC company
Maximum Number of Directors in an OPC Company
While an OPC company can have a minimum of one director, the maximum number can go up to 15. An OPC company can also register for a resolution to increase this number. While a one person company is allowed multiple directors, it can only have one shareholder. This is because an OPC is about owning a company alone by a single shareholder. That sole ownership provides the flexibility that forms the primary benefit of incorporating an OPC company.
How to Incorporate an OPC Company?
As we have already discussed, an OPC company can be established by a single person only. To do so, he must subscribe to the memorandum of association and fulfil other prerequisites as mentioned in the companies act. It is also essential to include all crucial information about the nominee in the memorandum of association which will take over the OPC in case the original owner passes away. You will also need class 2 digital signature certificates for the application form.
Having fulfilled all the mentioned prerequisites, the person then applies to the registrar of companies. In the application form, he must also attach the memorandum of association along with a self-declaration by the nominee validating his consent. If necessary, the nominee can withdraw his nomination from the OPC at any given time of the application process or even after the incorporation of the OPC company. For this, the nominee must submit the appropriate application form to the registrar of companies.
Conclusion
In the above post, we have included all necessary information about OPC registration while also answering your question about owning multiple one person companies at the same time. The answer is simply a no. If you require further assistance with OPC registration and legal compliance, you can contact Lawgical India and its team of legal experts.
