One person companies in India make up a significant part of the economy and are especially popular among freelancers and small business owners. They’re also called ‘sole proprietorships’ or ‘individuals carrying on an enterprise’, which makes them sound bigger than they are. To avoid any confusion, let’s just agree that one person company formation in India is exactly what it says it is—a form of incorporation that only involves one person.
Benefits of a One Person Company
A one person company has many benefits that are not available to a regular private limited company, such as personal liability protection and the ability to be a sole director. It is also much cheaper, requiring only an annual fee of Rs 500. For more information on the one person company, get in touch with our experts at Contact Lawyer. They will answer any queries you may have about registering your own one person company today!
Setting Up a One Person Company
To start a one person company, you need to register the business name with the state government and apply for a PAN card. As an individual, you don’t need any other licenses or permits. To register the business name, apply for a PAN card and get a bank account, it will cost you Rs. 10,000 to Rs. 15,000 INR (~$150 USD). The registration process is fairly straightforward as all of the documents needed are already on file with the government.
Operational Procedures
1. Find a company name (this can be your name, or a clever play on words)
2. Register for a PAN card
3. Register for the GST
4. Get an ROC from the Ministry of Corporate Affairs
5. Apply for a TAN from the Income Tax Department
6. Register your company with the Department of Corporate Affairs, Ministry of Commerce and Industry
7. Apply for an EIN number from IRS
Taxation Procedure
The Indian Income Tax Department has rules and regulations that dictate how small businesses are taxed. The procedure for determining one person company taxation is as follows:
1) Determine whether the business entity is a sole proprietor, partnership, or company. 2) Calculate the net income and expenses of the business (excluding personal expenses). 3) Calculate the tax based on your income bracket. 4) Determine any additional taxes owed. 5) Pay all taxes owed. 6) File a return with the Indian Income Tax Department by April 30th of each year following the calendar year in which profits were earned. 7) Keep all records of income and expense transactions for seven years from date transaction occurred or will occur
Legal Considerations
If you’re looking to start a business, it’s important to know what your legal obligations are. This is especially true if you plan on being the only person working in your new company. If you have no partners, then there’s no need for articles of association or a memorandum of association. However, if you do have partners, then these documents will be required in order for the company to be registered as an LLP.
Auditing Requirements
There is no special requirement for the audit of a one-person company. However, there is a need to present a balance sheet and profit and loss account of the company at the end of each financial year. Apart from that, annual returns are also required. The accounts should be audited by an auditor who needs not be an external auditor as long as he or she belongs to the Institute of Chartered Accountants (India). In order for an auditor to be appointed, he or she must give notice in writing of his or her intention to act as auditor at least one month before the end of each financial year.
Completing Documentation & Application Procedure
The first step is to file an application for registration of your company. The application is free and can be completed online or by downloading the form from the Ministry of Corporate Affairs website. Once you have submitted your application, you will receive a date on which you should attend the registrar’s office for submission. The registrars office will then decide whether or not your company is eligible for registration under Indian law. If it is, they will assign a number and send it back to you via email or post. Next, you’ll need to fill out some more documentation before submitting them again at the registrar’s office – this time with all your paperwork attached too! Once they have reviewed everything, they will give you a date when your company should be registered with the government.