OPC, which stands for One Person Company, has gained prominence over the years. One Person Company has emerged as a beacon of hope for those sole entrepreneurs who wish to set up and manage their business functions on their own. However, like all other business entities, One Person Company in India has several compliance and taxation requirements. Are you curious to learn them in detail? If yes, you are following the right page. Be here till the end, as this blog will offer a brief understanding of OPCs and the primary aspects of compliance and taxation requirements OPCs should consider.
What is an OPC?
An OPC refers to a business structure that enables a single person to manage a firm as an independent legal and licensed firm. This feature is the same as a private limited company, which offers the business owner restricted liability protection. The Companies Act 2013 permits the establishment and administration of OPC in India.
- One-person companies for solo business owners– OPCs must follow the compliance and taxation requirements for a smooth business operation and to avoid involvement in legal matters. By following the guidelines of the Companies Act, fulfilling annual filling criteria, and following income tax laws, OPCs can form a sound foundation for their business undertakings.
- Taxation for OPCs in India– The latest corporate tax rate is around 25%. However, the governing body may levy according to the income of the OPCs. By following the guidelines of the Companies Act, annual filings, and income tax laws, OPCs can form a strong foundation for their business undertakings. Following the advice of company secretaries and chartered accountants is a good idea since their knowledge and expertise can offer help with taxation and compliance regulations regarding OPCs in India.
- Minimum Alternate Tax (MAT)– One Person Company in India is also prone to Minimum Alternate Tax (MAT). Governing bodies apply this when the assessable income of a company, according to the legal guidelines of the Income Tax Act, is less than a fixed percentage of its book profit. In modern times, the MAT rate is around 18.5% in addition to the justifiable cess and surcharge.
Compliance Requirements for a One-Person Company in India:
- Annual filings- All the One Person Company in India should adhere to the guidelines of the Annual Fillings. These involve filing money-related statements (Profit and Loss Account, Balance Sheet) and annual returns with the RoC (Registrar of Companies). Note that this is a crucial step. The OPCs must complete this step within a set time.
- Board Meetings– The interval between two board meetings should be a minimum of three months. It is necessary to maintain the decorum in the meeting. The meeting should not be for a long time. There is a particular set time. Hence, it is necessary to put all the points within that period. Since sometimes it is difficult to understand the compliance and taxation regulations, it would be good to follow the advice of experts like chartered accountants. Since these experts are highly knowledgeable about these topics, they can easily make you understand them.
- Appointment of Company Secretary– Okay, wait! Read properly and understand this point very well! Note that this condition does not apply to all firms. However, firms whose paid-up share capital is around ten crores or more must hire a full-time company secretary. To make the process easier, you must consider collaborating with trusted and reputed platforms that help manage tax compliance. If you follow this advice, research is the primary step involved. Partner with them, give them your responsibility, and you can focus on your business undertakings tension-free. Rest is their call. The result is the least business risk and effortless business proceedings.
- Tax Audit– All One-person companies that obtain or surpass a specified turnover of around one crore or more in a financial year should also undergo tax credit. If the situation is such, a qualified and reputed Chartered Accountant must lead a tax audit. After this step, it is necessary to submit the income tax returns and tax audit report.
- Statutory Audit– The One-Person Companies of India must lead a statutory audit of their money-related statements. In such a circumstance, where an OPC Company of India should conduct a statutory audit of its money-related statements, it is best to rely on the Company Secretaries and Chartered Accountants. Their experience in the industry and knowledge of these subjects is praiseworthy. Hence, they can provide vital information and understand regulations. The result? Since it is difficult for many to understand these laws and the steps these OPCs should follow, they offer the best guidance.
- Adherence to the Company Act 2013– It is necessary that the OPCs adhere to the regulations set by the regulatory bodies. A few examples of adherence to these laws are as follows:
- To fill up the required returns and forms with the Registrar of Companies.
- To manage the books of accounts effectively.
- Annual Compliance.
- To generate invoices with accurate details.
- To maintain and effectively manage registers.
Note– Though it is not easy to obtain an OCC license, OCC in India is beneficial. Some prime benefits of it include single ownership, limited liability, etc. In addition, these firms get more tax benefits than a Private Limited Company. For instance, they easily get a business loan if they apply, unlike a private limited company where the loan application is a lengthy procedure.
Conclusion– OPC Companies have emerged as a ray of hope for business owners interested in a sole proprietorship business. However, these OPCs must understand the necessity of compliance and tax regulations and the steps involved. They are crucial for obtaining legal status in the industry and avoiding involvement in legal matters. Hence, these OPCs must select reputed and experienced platforms that help these firms with their expertise. Some instances of adherence to these regulations include annual compliance, managing books of accounts, etc. Some primary benefits of One-Person companies in India include single ownership, limited liability, etc. For this reason, entrepreneurs are passionate about establishing their OPC in India.
