Difference between Sole Proprietorship and One person company

Sole proprietorship

The simplest form of business carried on by individuals who are personally liable for debts. A sole proprietorship is not a legal entity like a partnership or a corporation. A sole-proprietor can apply for company registration under his name or under a fictitious name. Costs are nominal to start this kind of business, however, the disadvantage lies with financial failure situation. If the business fails to earn a profit then creditors can file a lawsuit against sole-proprietor. Business liability can be discharged against his personal assets. Moreover, if the owner dies, there are little chances of survival. Expansion of business after a point becomes a tough job. The advantage is this kind of entrepreneurs need not enter into board meetings and annual meetings. Returns are signed under their name. They have flexible working hours. Sole proprietorship and One person company are very different from each other.

One Person Company (OPC)

The Companies Act, 2013  introduced a new form of business, a hybrid of Sole-proprietorship and Company, by providing sole proprietors with an opportunity to enter into a corporate world. It is treated as a private company only having a separate legal entity and limited liability. One Person Company Registration, which is a new concept in India, already sees a big boom. One Person Companies are helping tremendously in increasing the overall economy of India. A huge impact on the economy and development of the nation is expected. It gives opportunities to many and will, therefore, bring creative and young minds in front of everyone.

Both Sole Proprietorship and One person company are beneficial in their own terms. Both need one person to operate the whole business but they may differ in some other terms.

Difference between Sole Proprietorship and One person company

1. Registration

  •  In Proprietorship, registration of the company is Not Compulsory. A proprietor can register if he wants to register his company.
  • In One Person Company, company Can be registered under MCA and Companies Act 2013.

2. Legal status of an entity

  •  A proprietorship is Not considered as a separate legal entity
  • One Person Company is a  Separate legal entity.

3.Members liability

  • A  Proprietor has Unlimited liability.
  •  In One Person Company, liability limited to the extent of share capital.

4. Minimum number of member

  • In a Proprietorship, there is only a Sole Proprietor.
  •  In One Person Company, there is a Minimum number of 1 person is essential.

5. Maximum number of members

  • Maximum 1 person is allowed in Proprietorship
  • Maximum 2 person is allowed in One Person Company.

6. Foreign ownership

  • Foreign ownership, not allowed in Proprietorship.
  • In One Person CompanyForeign ownership is Allowed if one is the director and the other is the nominee. Both the director and the nominee cannot be foreign citizens

7. Transferability

  • Transferability in Proprietorship is Not allowed.
  • In One Person Company, Transferability allowed to 1 person only.

8. Survival

  • A Proprietorship comes to end on death or retirement of the member
  • In One Person Company, Existence is independent of directors or nominee

9. Taxation

  • Proprietorship business is Taxed as an individual
  • One Person company tax rate is 30% on profits plus cess and surcharge

10. Annual filings

  • Proprietorship Income tax returns with the registrar of the company.
  • One Person Company Filed with the registrar of the company.

Conclusion:

Sole Proprietorship and One person company are very different from each other. A proprietorship is not a separate legal entity whereas one person company registration is a separate legal entity. Not only this but also varies in terms of existence as proprietorship is come to end on death or retirement of the member whereas One Person Company’s Existence is independent of directors or nominee.

Related Article

What are the requirements for OPC Registration?

Disadvantages of One Person Company 

Board Reports for OPC and Small Company

2018-11-06T05:27:12+00:00One Person Company|