Reasons and Steps to Convert Sole into One Person Company!

Reasons and Steps to Convert Sole into One Person Company!

Sole proprietorship is a type of business in which one person only owns and manages the business. It is very useful for small investors as it requires less capital investment and easy starting. The profit earned by this type of business belongs only to the owner and he only is responsible for any debt or loss. But, in case of loss, the amount recovery is done by the personal funds and assets of the owner. In case of death or injury of owner, the business cannot be carry on.

One Person Company

The one person company also has single ownership and it was introduced few years back for encouraging small scale businesses and start-ups. It has minimum maintenance cost and a separate identity. Also it has limited liability owing to which it has become popular form of business.

Benefits to convert sole into one person company:

It offers a separate legal identity which allows protection of personal assets.

The limited liability of the business provides possession of limited amount of shares in the company, hence limited loss in case of company losses.

The one person company is easy to manage as there are no requirements of annual meetings or general meetings. Also, complete authority is under one person for decisions.

Big companies prefer to work with sole into one person company as it is similar to private limited. It creates trust and credibility of the company. Also it improves confidence of suppliers and customers.

It has better chances of obtaining funding from the financial institutions.

It is well-organized sector with limited liability.

In this, the owner is directly liable for all the profits or losses. This form of business does not require any legal formalities; hence it is considered a highly convenient form of business for small investors.

Process to convert a Sole Proprietorship into One Person Company

Step 1 -Getting Director Identification Number of the company director with DIR-3 form.

Step 2 –Obtaining Digital Signature Certificate of online filing of application

Step 3 –Filing the application for name approval of company

Step 4 –Preparing Memorandum of Association and Articles of Association for filing.

Step 5 –Sign and File essential documents that includes MoA and AoA in various e-forms for company registration

Step 6 – After complete investigation the Certificate of Incorporation is obtained from Registrar of Companies

Documents critical for the conversion:

• Address Proof of director and nominee. (not older than 2 months)
• Proof of Identity all nominees and directors.
• Approval of Nominee by the Registrar of Companies (RoC).
• Proof of Registered Office.
• Passport Photograph of the directors and nominee.

Also, it is regarded as a separate entity with succession and limited liabilities. Some of the highlighted advantages of OPC are:

• Limited Liability
• Legal Status
• Corporate Identity
• Quick Decision Making
• Flexible in Management
• Easy bank operation
• Reduced taxation burdens.

Kavita is working as a consultant at a legal services in India. She is also an experienced and passionate writer who has been written many Blog and websites' content about Company registration and Trademark registration in India.