Once you have a vision for your business you will need a vehicle or structure for delivering it which is the organisation. To choose the format of the organisation you will need to consider recognisation of the structure or credibility, risk associated with it, speed and flexibility of decision making, ability to quickly scale up and and ease of access to funding. CONGRATULATIONS ON CHOOSING A ONE PERSON COMPANY
REGISTER START-UP AS ONE PERSON COMPANY
One Person Company is a new type of business entity that allows a single entrepreneur to operate a corporate entity with limited liability protection.
Introduced by the Companies Act 2013 as an improvement over the sole proprietorship it gives a single promoter full control over the company while limiting his/her liability to contributions to the business. This person will be the only director and shareholder. There is a nominee director but with no power until the original director is incapable of entering into contract. If an OPC hits an average three-year turnover of over Rs. 2 crore or has a paid-up capital of over Rs. 50 lakh, it must be turned into a private limited company or public limited company within six months.
When you register an OPC or one person company it is essential to understand that both the member and nominee have to be a residents of India. An OPC is exempted from stringent legal compliances of general meeting, board meetings, quorums, voting inclusion of cash flow statements in financial statements, mandatory rotation of an auditor. Appointment of a company secretary is not essential and the annual return of an OPC can be signed by its director in case no company secretary has been appointed.
An OPC is not allowed to carrying any Non-Banking Financial Investments activities, converting a wholly owned subsidiary into an OPC and also issuing any kind of Employ Stock Scheme. The Income Tax, Act does not recognise the concept of an OPC – it is he Income Tax, Act, 1961 does not recognise the concept of an OPC and it is taxed as a private company whereas sole proprietors are taxed at the rate applicable to individuals
OTHER RELATED SERVICES
Most businesses choose to register for GST right from the beginning even if it does not apply to them immediately since it has multiple advantages.
REGISTRATION PROFESSIONAL TAX
Has to be done within 30 days of setup. in many states even if there are no employees when the business starts its journey.
SHOPS AND ESTABLISHMENTS
A law driven by welfare of workforce almost all businesses fall within the scope of this state law and are required to register within 30 days
A facilitating legislation for the benefit of Micro Small Medium Enterprises (MSME) this provides access to a host of benefits for the business
DOCUMENTATION FOR DIRECTORS & PLACE OF BUSINESS
DOCUMENTS REQUIRED DIRECTOR & NOMINEE
- Passport size photograph
- PAN Card – scan of front and reverse
- Aadhaar Card – all 12 digits must be clearly visible
IDENTITY PROOF - any one document
- Driving License
- Voter ID
** The director need not presently be resident at the address mentioned in the ID proof document.
ADDRESS PROOF - any one document
- Electricity Bill
- Bank Statement
- Landline or Broadband bill
- Mobile Phone Bill
** (1) Bill should be in the name of director – joint names are acceptable (2) Bill should be less than 60 days old.
DOCUMENT REQUIRED FOR PLACE OF BUSINESS
OWNED BY DIRECTOR
- Electricity Bill OR Landline Bill OR Broadband bill OR Gas Bill
- No Objection certificate from director
** (1) Proof of ownership like sale document may be called for by MCA if it considers it necessary. (2) Utility bill must be less than 60 days old at time of application
RENTED OFFICE PREMISE
- Rental Agreement
- Electricity Bill OR Landline Bill OR Broadband bill OR Gas Bill
- No Objection certificate from landlord
** Utility bill must be less than 60 days old at time of application
TEMPORARY OFFICE PREMISE
A company may be registered at a temporary premise with a utility bill and and a No Objection from the owner of the property in the same way as if owned by director.
** If the option of a temporary office is taken then the company is required to submit details of its’ registered office within 30 days of its’ incorporation.
STEPS TO REGISTER YOUR STARTUP COMPANY
Giving your organisation a name and getting it approved is initiation. Once name is approved you can also consider booking a domain name and possibly getting it trademarked sometime in the future
Documents pertaining to the identity and address proof of the director,nominee and place of business and mentioned above need to be collected. Declarations and affidavits also need to be done
Due care must be taken to draft these critical documents that define the organisation: in layman terms the Memorandum of Association (MoA) defines the scope of business while the Articles of Association (AoA) define the internal rules of management of the organisation
Application made all attachment of proof of identity, address, affidavits, MoA and AoA and if in order company get incorporated with CIN number for company & DIN number for directors whilst the income-tax department gives PAN & TAN number
You need to get stationery and visiting cards done, book your domain and open bank account for the company. Over the next month you need to have the first board meeting and possibly get registered for GST, MSME, Shops & Establishments and Professional Tax. You also need to appoint the first auditors, print and send share certificates, apply for certificate of commencement of business
TIMELINE FOR INCORPORATION OF COMPANY
All documentation that is submitted to the MCA (Ministry of Company Affairs) for approval needs to be digitally signed. For this you would need a Class II Digital Signature. Digital Signatures are issued by licensed Certifying Authority (CA) in India under the Indian IT Act 2000. For creating a Class II Digital Signature you need an identity proof and an address proof. Your package includes a Class II Digital Signature valid for 2 years.
OUR COMPANY INCORPORATION PACKAGES
FEATURES OF PRIVATE LIMITED COMPANY
SEPARATE LEGAL ENTITY : Private Limited Company is a legal entity and a juristic person established under the Companies Act. Hence, a company has a range of legal capacities including opening of a bank account, hiring of employees, taking on equity or obtaining licenses and more as an independent corporate entity. The members (Shareholders/Directors) of a company have no personal liability to the creditors of a company for company’s debts.
UNINTERRUPTED EXISTENCE : Private Limited Company has ‘perpetual succession’, meaning uninterrupted existence until it is legally dissolved. A company being a separate legal person, is unaffected by the death or other departure of any member and continues to be in existence irrespective of the changes in ownership.
EASY TRANSFERABILITY: Ownership of a business can be easily transferred in a company by transferring shares. The signing, filing and transfer of share transfer form and share certificates’ is sufficient to transfer ownership of a company. In a private limited company, the consent of other shareholders may be required to effect share transfers.
BORROWING CAPACITY: Private Limited Companies can raise equity funds in India. Companies can also issue equity shares, preference shares, debentures and accept deposits with RBI permission. Banks and Financial Institutions prefer to provide funding to a company rather than partnership firms or proprietary concerns.
OWNING PROPERTY: Private Limited Company being an artificial person, can acquire, own, enjoy and alienate property in its name. The property owned by a company could be machinery, building, intangible assets, land, residential property, factory, etc., No shareholder can make a claim upon the property of the company – as long as the company is a going concern.
A COMPARISON OF ORGANISATION FORMATS
|CRITERIA||PRIVATE LIMITED COMPANY||LIMITED LIABILITY PARTNERSHIP||ONE PERSON COMPANY||PARTNERSHIP||PROPRIETOR|
|Is Registration Compulsory||Required||Required||Required||Optional||No|
|Registration under the Act is mandatory to set up Private Limited Company||Registration under the Act is mandatory to set up LLP||Registration under the Act is mandatory to set up One Person Company||Both registered and unregistered partnerships are there but registered partnership preferred because of many advantages||Registration is recommended to get the advantages of operating in a tradename|
|Is there a law specifically for this||Yes||Yes||Yes||Yes||No|
|The Indian Companies Act 2013||Limited Liability Partnership Act, 2008||The Indian Companies Act 2013||Indian Partnership Act, 1932||Not Applicable|
|What is the minimum and maximum number of members||2-200||1||2 – Unlimited||2-50||1|
|Requires minimum 2 and can have maximum 200 shareholders||Minimum 2 Designated Partners are required No bar on maximum number of partners: all partners need not be designated partners||Only an individual Indian resident can be the shareholder: however there has to be one nominee also||It needs minimum 2 partners and can have maximum 50 partners||Only one person being the business owner|
|Is it a separate Legal Entity||Yes||Yes||Yes||No||No|
|It can buy, hold, sell assets and contract liabilities in its' own name||It can buy, hold, sell assets and contract liabilities in its' own name||It can buy, hold, sell assets and contract liabilities in its' own name||It has no existence which is separate or distinct from its' partners||It has no identity separate from its' business owner|
|Do the members have protection from liability - is the liability limited||Limited||Limited||Limited||Unlimited||Unlimited|
|Liability of members is limited to the value of shares subscribed||Liability of members is limited to the value of capital committed by partners||Liability of members is limited to the value of shares subscribed||Partners are jointly and severally liable to pay the debts of the Partnership Firm||Proprietor is liable to pay the debts of the business|
|How are they taxed||Moderrate||High||Moderate||High||Low|
|Tax rate applicable for small companies is reduced to 22%||With tax rate of 30% on business profit, tax benefits to partners is high||Tax rate applicable for small companies is reduced to 22%||With tax rate of 30% on business profit, tax benefits to partners is high||Taxed at par with individual|
|Is Audit mandatory||Mandatory||Depends on circumstances||Mandatory||Depends on circumstances||Depends on circumstances|
|Auditor must be appointed within the 30 days of incorporation||Applicable when turnover exceeds INR 40 Lakh or contribution exceeds INR 25 Lakh||Auditor must be appointed within the 30 days of incorporation||Statutory audit not applicable. Tax audit may be applicable based on turnover||Statutory audit not applicable. Tax audit may be applicable based on turnover|
|How are legal compliances and formalities||High||Moderate||Moderate||Low||Low|
|Apart from Annual filings, it has to comply with various provision laid down, but less compared to public company||Annual filing and few event based filings are necessary||Apart from Annual filing, compliances are less compared to Private Company||Separate ITR of partnership is filed, else there is no filing requirement||Separate ITR of partnership is filed, else there is no filing requirement|
|Can ownership be easily transferred||Restricted||Restricted||Open||Restricted||Open|
|Shares can be transferred only with the consent of other Shareholders||Ownership can be changed with consent of other partners||One member can easily transfer his/her shares||Ownership can be changed with consent of other partners||Owner can easily sell/transfer the business|