​​How to Change a One-Person Business to a Private Limited Company in India

The OPC and PLC

One Person Company (OPC) is a business entity with limited liability that is run by one person. One Person Company is a legal entity distinct from its members that protects those who own shares in it. Every one-person company must name a member to fill the position of director in the MOA and AOA when the prime director isn't available.

A private limited company, also called an LTD or PLC, is a privately held company. This means that the liability of the business owner is limited to the number of shares owned, and the number of shareholders is limited to 50. It also stops shareholders from trading shares in public.

Benefits of a Private Limited Company (PLC)

Limited Liability

The liability of shareholders is limited to the value of their shares. Financial risks are a part of doing business, but they must be kept to a minimum to keep the business growing. In an LLC, if the company had to shut down for any reason, the shareholders wouldn't risk losing their personal assets.

Minimized Takeover Risks

When two shareholders trade shares, the risk of a takeover is kept to a minimum because shares can only be sold or bought if both parties agree.

Entity That Is Registered

Companies with limited liability are "incorporated." So, it will still be there even if the owner dies.

Making it easy to raise money

It's not just one person who can invest in a business or raise money for it, as is the case with One Person Company.

Dividends are not taxed.

Profits from private limited companies are taxed as business income. Shareholders don't have to pay taxes on dividends. Taxes are based on how much they pay in personal income tax.

Hiring Qualified Individuals

Private limited companies can get good employees, which helps the business grow a lot.

​​Conditions for a One-Person Company to Become a Private Limited Company in India

Before you can switch from a one-person company to a private limited company, you have to meet the following requirements:

1. At least two people should be in charge.

2. There should be at least two owners.

3. The paid-up share capital must exceed 50 lakh INR.

4. If the paid-up capital is less than INR 50 lakhs, the average annual turnover should be more than INR 2 crores in the first two months.

​​Documents Needed in India to Change a "One-Person Company" to a "Private Limited Company"

Conversion Required: What causes a conversion to be necessary?

The change from a one-person company to a private limited company becomes required when

1. A one-person company has a paid capital of more than Rs. 50 lakhs.

2. The average annual sales have gone up by Rs. 2 crore over the course of three consecutive financial years.

Then, to make the change, the following documents are needed:

Five E-Form, Inc.

A copy of the resolution must be sent to the Registrar of Companies along with the following:

1. An official copy of the board resolution

2. Most recent balance sheet and other financial statements

3. A certificate from a chartered accountant that shows how to figure out the average.

4. Sales during the time period in question

E-Form 6

application to change from a private limited company to a one-person company, along with the following:

1. Make a list of all the members and debtors.

2. Most recent financial report

3. A letter saying that the members and creditors have no objections.

4. An affidavit in the form of a letter of consent from the board of directors.

What does it mean for a conversion to be voluntary?

When a one-person company has been in business for two years, it can change into a private limited company on its own.

Then, the following documents are needed to make the change:

MGT 14 E Form

A copy of the Special Resolution must be sent to the Registrar of Companies along with the following:

1. Notice of an Extra General Meeting (EGM), which was held to get the directors' approval for changing the private limited company to a one-person company.

2. An official copy of the Special Resolution.

3. Changed the articles of association.

4. Changes to the articles of incorporation

5. You don't have to get a certified copy of the board resolution.

E-Form 6

application to change from a private limited company to a one-person company, along with the following:

1. Create a list of all members and creditors.

2. Most recent financial report.

3. A letter saying that the members and creditors have no objections.

4. An affidavit in the form of a letter of consent from the board of directors.

​​Process for Changing a One-Person Company to a Private Limited Company in India

The steps to change an OPC to a private limited company are as follows:

Informing the Registrar

Tell the Registrar of Companies that you now need to change your one-person company into a private limited company, whether you want to or not.

Choosing the Director

Appoint at least one director to help you run the business. They can also act as a co-shareholder.

Organize a general meeting.

Set up a general body meeting and pass a resolution to raise the paid-up capital of your company (if it's needed).

Getting the Board Resolution for the Conversion

Pass a board resolution that changes the Memorandum of Association and Articles of Association.

Get a NOC from the creditors.

Hold a general body meeting and get "no objection" from your company's creditors.

Draft a new MOA and AOA.

Make changes to the Memorandum of Association as well as the Articles of Association.

Fill out the conversion application online.

File the online e-form through the online MCA portal to start the process of company conversion.

​​We can help you change your one-person business into a private limited company in India.

We at Certpedia  can help you switch from a one-person company to a private limited company from start to finish. Our services include:

1. Help with the appointment of the director.

2. Help with obtaining the NOC.

3. Doing the things that need to be done to change the MOA and AOA.

4. Sending in the application to change

5. Going over the application and making any necessary changes.

6. Making sure that your business entity is changed in the way you want

is a top legal Certpedia consulting firm that offers services for everything from a one-person company to a private limited company.

So, take the first step toward this change by getting in touch with us.