One Person Company VS A Sole Proprietorship Company

According to the Companies Act, 2013 with the Ministry of Corporate Affairs in a One Person Company (OPC) is a separate legal entity with just one member and only one shareholder while in a Sole Proprietorship Company is a business that is owned and governed by one person. This article elaborates on the key differences between the two.

What is OPC?

OPC is a company registration where only one person is required as the board of member for the company to function. There are instances where we see startups and SMEs lack shareholders and benefactors in the beginning. So getting registered under an OPC act is the most convenient option for newborn ideas. Read more

What is a Sole Proprietorship?

The Sole Proprietorship is the simplest business form under which one can operate a business. A Sole Proprietorship is not a legal entity. However, it simply refers to a person who owns the business and is personally responsible for its debts.

Let us look at the key differences between a One Person Company and a Sole Proprietorship Company:

• ENTITIES: In OPC the owner and the business are considered as two separate entity. While in Sole Proprietorship the owner and the business are defined to be a single entity.
• LIABILITY: In OPC the owner's liability is their investment in the company. While in Sole Proprietorship as the owner and business is a single entity if the business incurs loss the owner is liable to it.
• TAXATION: As an OPC is registered as Private Limited Company hence taxed under the Income Tax Act for Private Company. While in Sole Proprietorship as the income generated by the organisation is treated as the owner's income and hence taxed as individual income.
• SUCCESSION: In an OPC requires having a nominee be allotted by its member. The nominee should also be a natural-born citizen and resident of India. In the case of a Sole Proprietorship, succession can only take place through the implementation of the Last Testament and Will, which may or may not be challenged at the court.

How can we help you?

You can choose between a Sole Proprietorship and OPC depending on your requirements, type of business, and the risk involved in the business you can register online. To know more about the process in detail seek help from Online Legal India™ a platform managed, operated and driven by CA, CS, IT professionals, Lawyers and Influencers, who have vast experiences into the respective fields.