Conversion of Sole Proprietorship to OPC and its Governing Rules

One Person Company and Sole Proprietorship are two different business structures & also are different in terms of their working but sometimes people get confused between them due to their similar sounding words.



Sole Proprietorship registration is a popular type of enrollment of unregistered business institution owned, managed, and operated by a single person.  Sole proprietorship is the “One Man Business Entity”. All the investments for the business with sole proprietorship registration is done by the single proprietor who bears all the losses and enjoys all the profits. The overall control of the business as well as its management is in his hands. He can appoint individuals for conducting the business, but the ownership will rest solely with him.

Whereas one the other hand, One person company registration is an improved and better form of a sole proprietorship registration. One person companies are a great business organization structure for medium-sized businesses. The Company which has only one person as its member. It is a fusion of Sole-Proprietorship  and Company form of business. In order to enable a person who is carrying on the business in the Sole-Proprietorship firm to enter into a corporate outline with relaxed or concessional requirements under the Act, the Companies Act 2013 had brought in the new concept of OPC.

This business structure gives the single promoter a full control over the company and at the same time limiting his liabilities to safeguard his personal assets. The owner of this company is a shareholder. Similar to Private Company, OPC may also appoint a distinct individual as director for its management. Appointment of a nominee is mandatory in case of OPC.

Since, OPC is an improved and better form of a sole proprietorship firm and thus conversion of firm with sole proprietorship registration into One Person Company is a good business decision.

Prerequisites of Converting Sole Proprietorship to One Person Company:

- An individual can form a company with one single member and one director. The director and member can be the same person but can be a member in only one OPC

- One shareholder must be a resident of India.

- It shall have a minimum of one director, Only individuals can be designated as directors.

- The minimum authorised & subscribed share capital capital of Rs.1 lakh is prescribed. Further, the name of the OPC should be unique and should not be similar to any existing company name or trademark.

- A person must be appointed as nominee.

- The name of the company shall be ending with the words ‘(OPC) Private Limited’

Procedure

The following procedure needs to be followed for the conversion of business with sole proprietorship registration to OPC -

Step 1 - Obtaining Director Identification and Digital Signature Certificate

Step 2 - Applying for name approval

The following step is to get the Company’s name approved. The name can be approved in the Form SPICe+ 32 application. Only one preferred name along with the significance of keeping that name can be given in the Form SPICe+ 32 application. In case the name gets rejected, another name can be submitted by applying another Form SPICe+ 32 application.The name of the company is to be ended with the words ‘(OPC) Private Limited’

Step 3 - Drafting Memorandum of Association (MoA) and Articles of Association (AoA) describing the objectives and the rules of the company which are to be submitted to the ROC

Step 4 -Submit all the necessary documents required and then apply for the incorporation of the company to the Ministry of Corporate Affairs (MCA). The forms to be submitted to the MCA are:

Required Documents

➤ Proof of Identity

- Proof of identity for Directors/Shareholder (Voter ID/Passport/Driving License)

- PAN Card for Indian Nationals /Passport for Foreign Nationals ( Both are Mandatory)

- Address proof of Directors and Shareholder (Out of Latest bank statement, telephone bill, mobile bill, electricity bill or gas bill should be submitted as a residence proof. Ensure that statement shouldn’t be more than 2 months old)

➤ Proof of Registered office

- Conveyance/ Lease deed/ etc. along with rent receipts (any one)

- Copy of the utility bills (Telephone/Gas/Electricity bill) (must not older than two months)

- If the registered office is rented, the rent agreement and a NOC from the landlord has to be submitted.

A Nominee has to be appointed as there is only one director and member. The consent of the Nominee is to be taken along with the PAN and Aadhar card in Form INC 3. The declaration and consent of the proposed Director is also taken in Form 9 and DIR 2 respectively. Apart from all, you need a declaration by a professional certifying that all the compliances are met. 

Step 5 - The Registrar of Companies (ROC) will issue a Certificate of Incorporation upon verification of all documents.

Cessation

Both Sole Proprietorship and OPC are beneficial in their own domain. Both have their own merits and shortcomings. Hence, it solely depends upon the motive and objectives of the entrepreneur when it comes to converting a business with sole proprietorship registration to OPC. Individuals who want to start a business from home or on a premise with a minimum amount can opt for Sole proprietorship registration. But with time and after a decent growth, if you want to start a corporation with less compliance, then Converting it to One Person Company is the best choice for you.

In short, the choice of business structure varies from person to person and business to business depending upon their intention. On that account, the decision must be taken after careful consideration of all the factors involved and see if it genuinely brings about privileges intended.

It was the overall process of converting a business with offline or online sole proprietorship registration into a private limited company. It should also be noted that almost the same procedures mentioned above apply in other cases, where one legal entity converts into any other legal firm.


SuperCa

Online GST Registration | Online GST Return Filing | Online Company Registration | Online Sole Proprietorship Registration

Comments

Post a Comment

Popular posts from this blog

Why is GST Return Important? Is it Necessary To File GST Returns Every Month?

Image
What GST Return Is? GST return is a document that contains all the details of sales, purchases, tax collected on sales, and tax paid on purchases. Once you file GST returns, you will need to pay the resulting tax liability i.e money that you owe the government. The details of sales and purchases of the goods and services plus the tax paid and collected have to be furnished by all registered individuals, traders, organizations, and companies. Such details are submitted by filing a GST Return and on this, the tax authorities calculate tax liability. The registered GST user will have to file the return, including purchases, sales, output GST, and input credit of GST. A registered user has to submit 4 forms to file their GST return: return for purchases, return for sale/supplies, monthly return, and annual return. Quarterly returns are to be submitted by those who have opted for the composition scheme. Importance of   GST Return filing All the Registered Dealers are required to file GS...
Read more

What has happened in 4 Years of GST?

Image
  On 1st July 2021, the Goods and Services Tax (GST) completed its four years and celebrated it by flagging the ease it brought to businesses and the relief on the tax burden to consumers. GST implementation in India was a historical move, as it marked a  s ignificant indirect tax reform in the country. The amalgamation of many taxes levied at a central and state level into a single tax was expected to have big advantages. Four years ago, on this day, GST had replaced 17 local levies like excise duty, service tax, VAT and 13 cesses. One of the most important benefits of the move is the lessening of double taxation or the removal of the cascading effect of taxation. It is now paving the way for a common national market and Indian goods are also expected to be more competitive in international and domestic markets. Pros. On this occasion, the Union Finance Ministry has notified a cut in the GST rates on 400 goods and 80 services, thus giving a big relief to the common citizens o...
Read more

Difference between General Partnership firm and Limited Liability Partnership

Image
In businesses, the partnership is an association of two or more people, who agree to carry on the business together by combining their financial funds and managerial abilities and skills and share its profits and losses. The most used partnership types are   General Partnership   and   Limited Liability Partnership (LLP) A  General Partnership firm  is registered by two or more persons by executing a partnership deed with each other. Even though this form of business is governed under the Indian Partnership Act 1932, the partners are at free will to decide on various terms pertaining to the share of profits and other related matters. In India normally all partnership firms are general partnerships.   Limited Liability Partnership  is an alternative business form that provides limited liability to the owners and is comparatively easy to manage and hassle-free. It is allowed under the Limited Liability Partnership Act, 2008. LLP is a unique hybrid combin...
Read more