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CS Executive · Setting Up of Business, Industrial and Labour Laws · Identifying Laws applicable to various Industries and their Initial Compliances

Vikram, a resident Indian, wants to run a venture alone but with limited liability and a separate legal entity, and he intends to nominate his wife to step in if he dies. Which feature is correct for the entity he should choose under the Companies Act, 2013?

He should form a One Person Company. It has a single member, is a separate legal entity with limited liability, and its memorandum must name a nominee who steps in on the member's death or incapacity. A proprietorship lacks limited liability and a Section 8 company cannot distribute profits.

  1. AA sole proprietorship, since it allows a nominee and limited liability
  2. BA One Person Company, which must name a nominee in its memorandumCorrect
  3. CA private company needing at least two members and a nominee
  4. DA Section 8 company, since it allows a single member to distribute profits

Explanation

An OPC has a single member and the memorandum must name a nominee who takes over on the member's death or incapacity. A proprietorship offers no limited liability. A private company in the usual sense needs at least two members, and a Section 8 company cannot distribute profits to members.

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