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Difference between One Person Company and Sole Proprietorship

One Person Company (OPC) and Sole Proprietorship are two different legal structures for small businesses. Both facilities cater to entrepreneurs who wish to operate their businesses with minimal complexity and compliance requirements. However, they differ significantly regarding legal identity, liability, ownership, and governance. In this article, we will explore the differences between One Person Company and Sole Proprietorship, shedding light on their unique characteristics and helping entrepreneurs make informed decisions when selecting the appropriate structure for their business ventures.

What is an Open Person Company?

An OPC is a hybrid type of business that offers features of Sole proprietorship and a Private Limited Company. The OPCs are governed under the Companies Act of 2013. A Person Company is treated as a separate legal entity with limited liability. All the OPCs must hold at least one board of directors meeting each half of the year.

What is a Sole Proprietorship?

The Simplest form of business to be carried by individuals is the sole proprietorship. It is not a legal entity like a partnership or a private limited company. The costs for starting a sole proprietorship are minimal. The advantage is that there is no need to enter the board and annual meetings. The Proprietorship and the proprietor are considered to be the same legal entity.

Opc vs. Proprietorship

Difference	One Person Company	Sole Proprietorship
Registered	It is registered under MCA and Companies Act,2013	Is not a registered type of entity
Legal Status	Separate Legal Entity	The sole proprietorship and proprietor are considered to be one single entity.
Liability	The Liability is limited	Unlimited Liability
Transferability	Can be transferred to the Nominee	It cannot be transferred
Taxation	Taxed as at 30% of profits plus cess and surcharge	Taxed as an Individual.
Annual filings	Filed with the ROC	Income tax returns with the ROC.
Perpetual succession	Existence if independent of the sole promoter and the Nominee	The proprietorship comes to an end with the retirement of members

The OPC differs from a sole proprietorship in terms of law and functioning. Though similar, One Person Company is treated as a Private Limited Company with limited liability. One person company has only one person as a sole promoter of the company, and the other is a Nominee who is not supposed to be a minor. The OPCs must carry at least one meeting in each half of the calendar, and the gap between the two should not be less than ninety days. A sole proprietor is not a legal entity like a partnership or a private limited company. Also, there is no need to conduct board meetings and annual meetings as the Proprietor owns and controls the sole proprietor. Income and losses are taxed on the personal income tax return. To learn more, visit www.indiafilings.com or talk to our experts today.

About the Author

SAWANT MANSI MAHENDRA
Post By IndiaFilings.

Updated on: June 5th, 2023

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