Get more of such content, Weekly

* indicates required
Business & Marketing

Difference Between One Person Company And Sole Proprietorship

Proprietorship

Proprietorship was described as the purest form of business under which a company can operate. It is not a legal entity and means an individual who owns the company, who is personally liable for its debt. A single owner can operate under its owner’s name or do business with a fictitious name. Because of its simplicity and nominal costs, it is a popular business type in India.

When it comes to One Person Company registration, the company is specified by the company law 2013. The idea is new in India and helps entrepreneurs who are willing to start a company by establishing a single economic entity. It has a separate legal entity and provides limited liability insurance, similar to a corporation. It means that a lonely entrepreneur will run a company in this type of business.

Simply put, a sole proprietorship refers to a company controlled and operated by a person with no distinction between owner and corporation. And the idea of one individual company refers to a separate legal structure in which one individual can manage a business limited by its shares.

One-Person Corporation and a Sole Proprietorship are corporate structures intended for business people to pursue a single-handed enterprise. However, there are some essential variations, as can be seen below:

Registration:

Formal registration is not required for sole ownership. Nevertheless, OPC should be registered with the company registrar. The process is lengthy, involving the OPC Manager who are required the following;

DIN acquisition and DSC 

– Securing name approval 

– MoA draft 

– RoC compliance application for incorporation 

– Full formalities post-incorporation.

Taxes:

Being a legal company, a sole proprietorship is not charged. Instead, the company owners file their ns alongside their business taxes. As an individual, sole ownership is taxed on its net taxable income. In comparison, one-person corporations are classified for tax purposes as independent entities and must file separate income tax returns.

Legal Identity: 

A sole proprietorship is not a separate statutory body from the owner. The law would, therefore, regard the company as the same legal entity as the owner himself. A one-person corporation, on the other hand, is a different legal entity from the owner.

Liability of Proprietor/ Director:

In the event of debts/losses incurred by your company, a sole proprietor has unlimited responsibility. It ensures that only the company’s assets can be used to recover the debt while the corporation is in debt. This jeopardizes the personal properties of the owner. On the other hand, the Director’s liability is reduced in case of a debt incurred by an OPC and his assets are protected.

Independent Existence and Succession: 

One-person corporations are a distinct legal entity that operates ioperatestive of the Director’s life. A sole owner is not a separate statutory body from the owner and thus does not exist unless it exists. A-One Person Company may therefore be transferred to a replacement executive, while a Sole Proprietorship can be inherited only if the former owner dies.

Annual Compliances:

Only government ownerships and tax registration have recognized the scope of their compliance is limited to the annual reporting of their business, technical or sales tax. Because OPCs are independent legal entities, on the other hand, they have a comprehensive list of compliance criteria.

A proprietorship is recommended in a proprietorship, where a person is allowed to administer and monitor the process with less statutory compliance. Therefore, this kind of company is favoured, where the essence of the company is straightforward and less likely to entail small financial risks.

We must prevent large debts and, hopefully, the demand for goods will be minimal. The businesses with the least money best act as sole proprietorship businesses. Unregistered business is the ownership group. Therefore the proprietorship is not the right one if you have a business that needs to be subject to compulsory company registration.

Fighting between a sole proprietorship and one-person business is like two sides of the same coin. The single form of business ownership has its perks and drawbacks, while OPC has its pros and cons. OPC is like a single-person company similar to Sole Proprietorship. There is no clear way to register a Sole Proprietorship when it comes to the registration process. On the contrary, there is less legislation to be followed to register a One-Person Corporation.

When selecting the type of company, you must think before choosing as each business structure has some pros and some drawbacks. 

We just gave you a thorough analysis of both. It depends on your company style and preference. When you want to be your boss and run a company from home or without proper facilities or workplace, sole ownership enables you to be in complete charge. If you want to start a less-compliant business, One Person Company is for you. Ultimately, it’s your choice to choose between the two.

Imran Zahid
the authorImran Zahid
Hi I'm Imran Zahid a professional blogger having experience in blogging as well as freelancing. My basic researched on tech, health, entertainment, Digital Marketing and home improvement. I'd like to share my experience with all of you be connect to explore the knowledge. Thank you

Leave a Reply