Section 262 defines one person company as meaning a corporation which has only one person as a member section 3(1)(c) provides for incorporating such a company by saying that a company may be formed for any lawful purpose by one person and there are the company to be formed its to be one person company that it's to say a private company
the memorandum of one person company has two state the name of some other person with his prior written constant in the prescribed form who will in the event of death of subscriber to the memorandum or his in capacity to contract become the member of the company. A written consent of such person has to be filed with the registrar at the time of incorporation of the company. Such a person may withdraw his consent in prescribed manner. The one person member of the corporate may at any time substitutes such person with another person by giving notice in the prescribed manner. It's the duty of a member of one person company to inform the company of the change of the other person nominated by him by indicating in memorandum or otherwise within such time and in such manner as may be prescribed. The corporate has them to inform the register of any such change in the prescribed time and manner any such changes not to amount to an alteration of the memorandum.
Only one director is compulsory for such a company. Section 149 the wants of section 149(3) that every company has to have at least one director who had stayed in india for a total period of not less than 182 days in previous calendar year would have to be complied with by one person himself or in the alternative he may have to keep another person as the director for such compliance. A private who is member in deemed to be the first director of the one person company till such time that subsequent direct or directors are appointed in accordance with the provision of the act. Within the case of one person companies’ small company and dormant company the requirement at to meeting its team to have been complaint with if at least one meeting of the board has been conducted in half calendar year and the gap between two meetings is not less than 90 days. Provisions of section 174 on quorum are also not to apply.
One person company: overview
There are many various types of businesses out there and some may seem too challenging to manage at first because they consist of many employees or because they require a large amount of capital. One person companies, however, are quite different. They're small and lean, which suggests that they can be run from the home of the one employee/owner and don't require a large amount of capital to get started.
What is a one person company?
A one person company is a business that is operated by just one individual or family. It is also known as a single member limited liability company (smllc) or sole proprietorship. Essentially, there's no difference between this type of business and other businesses except for the size. The owner will perform all the tasks that might otherwise be handled by many employees in larger companies including sales and marketing, development and even customer service.
Why do people start one person companies?
The goal is usually to run a business that is tailored to the individual or even, as within the case of solo artists and entrepreneurs in music, to supply original music. However, even individuals or families who want to start out a new business may also want an additional source of income and do not have the time or financial resources needed for larger companies
Advantages of one person company
Separate identity– an one person company features a separate identity even though it has only one shareholder.
Having a definite identity from that of its owner itself creates a brand value for the company and customers find it more reliable.
Lesser compliance requirement- one person company has got to comply with lesser requirements under companies act, 2013 as compared to non-public and public companies. For eg. An one person company with just one director does not have to conduct an annual general meeting or board meeting, unlike private or public company.
Quick decision making- since the shareholder is that the sole authority and decision-maker it is easier for him to make quick decisions for the company.
He's not dependent on other people for approval and decision making which gives him complete freedom to make decisions on behalf of the company.
Succession- at the time of incorporation the only member has to appoint a nominee. If the member isn't able to continue the operations due to death or some unforeseen circumstances then nominee will be responsible to continue the business of the company.
Limited liability- unlike sole proprietorship, the member of an one person company won't be held personally liable and it is limited to the extent of the value of the share in his company. Personal assets of the members won't be affected and he can take more risks and explore opportunities.
Authorised capital- the minimum capital requirement to include an one person company is only rs. 1 lakh rupees. This model of business is favorable for little entrepreneurs who want to start independently.
Disadvantages of one person company
Tax rate- there are not any tax benefits for one person company and it is a big disadvantage.
It's considered as a private company under the income tax act, 1961 and it's taxed at 30% on total income.
High turnover not allowed- if an one person company features a turnover more than rs. 2 crores then it automatically get converted into a personal company. One person company isn't suitable for startups which have a high growth potential and can easily cross the required turnover.
Restriction on conversion- an one person company can't be voluntarily converted into a private company before two years of its incorporation.
This article is written by Yashika Santosh Patni of School of law, Sandip University.