Home Business Tips Difference between Sole Proprietorship and One Person Company

Difference between Sole Proprietorship and One Person Company


One person company vs sole proprietorship

An OPC is incorporated as a private limited company, where there is only one member and prohibition in regard to invitation to the public for subscription of the securities of the company.
Features of an OPC include the following:
An OPC can be formed under any of below categories :

  • Company limited by guarantee.
  • Company limited by shares

An OPC limited by shares shall comply with following requirements :

  • Shall have minimum [paid up capital of INR 1 Lac
  • Restricts the right to transfer its shares
  • Prohibits any invitations to public to subscribe for the securities of the company.

An OPC is required to give a legal identity by specifying a name under which the activities of the business could be carried on. The words ‘One Person Company’ should be mentioned below the name of the company, wherever the name is affixed, used or engraved.
The member of an OPC has got to nominate a nominee with the nominees penned consent, and file it with the Registrar of Corporations (RoC). This nominee in the event of Demise or in occasion of another incapacity, shall become a member of the OPC. The member of the OPC at any time can alter the identify on the nominee supplying a detect for the RoC in these types of method as prescribed. On account of Demise of the member, the nominee is automatically entitled for all shares and liabilities of OPC.
Features of Sole Proprietorship

  • Legally, there is no distinction between the business (commercial entity) and the sole proprietor (owner of the business).
  • Attached to a ‘natural person’. The sole proprietor of a business must be a ‘natural person’, i.e. a single real human being rather than a corporation or a fictional person.
  • Profits go to one person. All profits from the business go to the sole proprietor.
  • Losses all go to one person. Any losses borne by the business, including taxes, legal fees and debts, must be paid for by the sole proprietor.
  • Sole proprietors can register a trade name for their business if they wish.
  • Used widely by freelancers. Sole proprietors can own conventional businesses such as shops. However, in the present day many sole proprietors are freelancers.

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A One Person Company must convert itself into a private or public limited company the moment it has an average turnover of over Rs. 2 crore for three years or a paid-up share capital of over Rs. 50 lakh. A sole proprietorship, on the other hand, may remain one no matter what its revenues are.