India’s dynamic business landscape attracts investors and entrepreneurs from across the globe. With progressive laws and simplified business structures, foreign nationals increasingly consider India for expanding their ventures. A common question that arises among solo entrepreneurs from abroad is—Can a foreign national own a One Person Company (OPC) in India?
This article explores the legal provisions, eligibility criteria, alternatives, and practical considerations for foreign nationals wishing to establish or invest in a One Person Private Limited Company in India.
The concept of an OPC was introduced under the Companies Act, 2013, to provide a formal structure for solo entrepreneurs. It allows an individual to enjoy the benefits of a private limited company, including:
Separate legal entity status
Limited liability protection
Easy compliance framework compared to private companies
Simple management structure
Only one shareholder.
A nominee is mandatory.
Limited to resident Indian citizens only as per present law.
Cannot carry out Non-Banking Financial Investment activities.
As per Section 2(62) of the Companies Act, 2013 and related rules:
🔹 Only a natural person who is an Indian citizen and resident in India is eligible to incorporate an OPC.
🔹 ‘Resident in India’ refers to an individual who has stayed in India for at least 120 days during the immediately preceding financial year, as per the Companies (Incorporation) Second Amendment Rules, 2021.
🔹 Foreign nationals and Non-Resident Indians (NRIs) do not qualify to form an OPC in India under the current regulations.
No, a foreign national cannot directly own or incorporate a One Person Company in India, as the law specifically restricts this structure to resident Indian citizens.
The restrictions are:
Ownership: Only an Indian resident can be the sole member.
Nominee: The nominee must also be a resident Indian citizen.
Directorship: While foreign nationals can be directors in other companies, in an OPC, the sole shareholder and director must be the same resident Indian person.
The key reasons behind this restriction include:
🔍 Simplified Compliance Risk: OPCs are subject to fewer compliance requirements. Allowing foreign nationals could increase regulatory risks without equivalent compliance safeguards.
🔍 Monitoring Economic Ownership: The Government of India monitors foreign investment flows and economic control through mechanisms like FDI policies. Allowing OPCs could create loopholes for unmonitored foreign ownership.
🔍 Ease of Control and Jurisdiction: In case of legal disputes or regulatory actions, dealing with resident individuals simplifies the process compared to foreign parties.
Foreign nationals still have multiple options to own and operate companies in India. These include:
A foreign national can incorporate a Private Limited Company in India with one or more Indian or foreign shareholders.
100% Foreign Direct Investment (FDI) is permitted under the automatic route in most sectors.
A foreign company can set up a wholly-owned subsidiary in India.
This is the most popular choice for MNCs and overseas startups expanding into India.
LLPs allow foreign nationals to become partners.
FDI in LLPs is permitted in sectors where 100% FDI is allowed under the automatic route.
These options are regulated by the Reserve Bank of India (RBI).
Suitable for companies wishing to establish a presence without full-fledged incorporation.
All directors, including foreign nationals, need a valid DSC.
Foreign nationals can apply for DIN while filing the incorporation form.
Using the RUN (Reserve Unique Name) service on the MCA portal.
Draft the Memorandum and Articles of Association in compliance with Indian laws.
Submit the SPICe+ form along with necessary attachments.
Apply for PAN, TAN, and optionally GST registration post-incorporation.
Foreign-owned private limited companies must comply with:
Companies Act, 2013
Income Tax Act, 1961
Foreign Exchange Management Act (FEMA)
Goods and Services Tax (GST)
Annual filings with the Ministry of Corporate Affairs (MCA)
Additionally, they must file Foreign Liabilities and Assets (FLA) Return, and if applicable, comply with sectoral FDI limits.
Technically, yes, a foreigner can be appointed as a director in Indian companies. However, for an OPC, the sole shareholder and director are the same person, and this person must be an Indian resident. Hence, a foreign national cannot be a director in an OPC since they cannot be its shareholder.
| Particulars | OPC | Private Limited Company |
|---|---|---|
| Eligibility | Only Resident Indian Citizen | Open to foreign nationals |
| No. of Members | 1 | Minimum 2 |
| Directors | 1 | Minimum 2 |
| FDI Permitted | No | Yes (in most sectors) |
| Compliance Level | Lower | Moderate |
As of now, OPCs are intended to encourage Indian entrepreneurship, particularly for micro and small business owners. Allowing foreign nationals would shift this objective. However, if the Indian government liberalizes these norms in the future, foreign nationals may be allowed to incorporate OPCs.
Foreign nationals setting up companies in India are subject to:
Corporate Income Tax
Dividend Distribution Tax (as applicable)
Transfer Pricing regulations, if dealing with associated enterprises abroad
Withholding taxes on payments to foreign countries
Compliance under Double Taxation Avoidance Agreements (DTAA) where applicable.
Given India's commitment to improving the ease of doing business, the government periodically revises business structures. Though there are no current proposals to allow foreign nationals to own OPCs, it remains a possibility in the future as India strengthens its position as a global investment destination.
In conclusion, under current Indian law, foreign nationals cannot own or incorporate a One Person Private Limited Company (OPC) in India. However, foreign entrepreneurs have several other business structures they can choose from, such as Private Limited Companies, LLPs, or Wholly-Owned Subsidiaries.
For foreign nationals looking to start their entrepreneurial journey in India, it is highly advisable to:
Consult with qualified company secretaries and chartered accountants
Review FDI guidelines relevant to their sector
Choose the business entity best aligned with their goals and compliance capabilities