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Differentiate between Sole Proprietorship and One Person Company Registration

One Person Company Registration

Do you want to start a business as a single owner but need clarification between sole proprietorship and OPC Registration? These two business structures are the most popular options for solo entrepreneurs. Both sole proprietorship and one person company registration serve the individual business owners but are significantly different in many ways. In this blog, we will provide you with a comprehensive comparison between OPC registration and sole proprietorship for aspiring entrepreneurs so that you can make an informed decision. Both structures are meant for the single person company but you should have a proper knowledge about which one is better for you.

Before moving ahead with the differences, let’s have a quick glimpse at sole proprietorship and OPC Registration.

What do you mean by Sole Proprietorship and One Person Company Registration?

A sole proprietorship is a business that has been owned and managed by a single individual. It is the easiest and simplest form of the company. You can run your business as a sole proprietor by your legal name and maybe by a different trade name after registering it with local authorities. If someone wants to establish a company, it is the easiest type, as there is a lack of government regulations for a sole proprietorship. A sole proprietorship begins and ends with the decision of the sole proprietor or after their death.

OPC registration is also known as Single Person Company Registration. It is best for the solo entrepreneurs. It has been established and managed by a single person. Basically, OPC is a type of Private Limited Company with the same features. It has been registered under the Companies Act 2013. OPC Registration Online combines the benefits of a Private Limited company as well as the simplicity of sole proprietorship.

Quick Comparison Between Sole Proprietorship and One Person Company Registration

Particulars 

Sole Proprietorship

OPC Registration

Governing Law

Not any particular law

Companies Act 2013

Registration 

 No need of registration

Must be registered under the Companies Act 2013 on the MCA website

Liability of Member

 Unlimited Liability Limited Liability

Legal Status

 Not a Separate Legal Entity Separate Legal Entity
Director No need of Director

Requirement of 1 Director
Nominee  No need of any nominee

At Least 1 nominee required

Transferability of Ownership

 Cannot be transferred Can be transferred to the nominee
Existence  Ends with the death or retirement of the owner

Continuous existence
Taxation  Taxed in individual slab rate

Taxed with a rate of 30% on profit plus cess & surcharge
Annual Filings Have to file Income Tax Return only Filing with ROC i.e. Registrar of Companies as per the Company’s Act 2013 & Income Tax Act
Company Name Can run with owner’s name or under the trade name

Must add “(OPC) Private Limited Company” as suffix

Audit Requirement

 No need of audit Mandatory 
Management Structure Full control of the sole proprietor (owner)

Managed by the director of the company
Raising Capital Limited access to personal funds & borrowing capacity of owner

Better access to funding options including loans & investments

Understanding the Difference between Sole Proprietorship & One Person Company Registration in Detail

If you have any confusion among Sole Proprietorship & OPC Registration in India, here is your answer. As a solo entrepreneur, it is very important for you to understand that among both business structures, which one is better for you? You can start your entrepreneurial journey as a solo owner by understanding the accurate difference between Solo Proprietorship & OPC Registration Online. So, in this section of the blog, we compare both the business structures in detail.

One Person Company Registration vs. Sole Proprietorship Nominee & Directors  

  • Both the structures are specifically meant for single person company registration. For OPC online registration, there is a requirement of one director & at least one nominee. On the other hand, for a sole proprietorship, there will be no need for a director or nominee.

One Person Company Registration vs. Sole Proprietorship Liability Protection

  • An OPC Online Registration offers limited liability to the shareholder for the amount that he has invested in the company. The personal assets of the shareholder are not at stake in the case of business debts. Whereas in Sole Proprietorship, the owner has unlimited liability and his personal assets are also at risk during the time of business debts.

Sole Proprietorship vs. One Person Company Registration Taxation

  • An OPC Registration online has been taxed with a tax rate of 30% in addition to the cess & surcharge. Hence, it can be more complex. On the other hand, the taxation system of a sole proprietorship is simple as it has been taxed at the slab rates of individuals.

Sole Proprietorship vs. One Person Company Registration Regulatory Requirements

  • It is mandatory for the OPC Registration in India to comply with the several regulatory requirements, including annual filings, audits & maintaining the statutory records.  However, there is no such requirement for a sole proprietorship, making it easier to manage it.
  • A one person company must have to fulfill its annual filing with ROC, i.e., Registrar of Companies, including INC 20, ADT 1, AOC 4 & many more. However, a sole proprietorship just needs to file the Income Tax Return.

One Person Company Registration vs. Sole Proprietorship Existence

  • With OPC Registration online, you can enjoy the benefits of perpetual existence. An OPC exists even after the death or retirement of the owner. However, the nominee will take over it. On the other hand, a sole proprietorship dissolves with the dearth or retirement of the owner.

One Person Company Registration vs. Sole Proprietorship Transferability of Ownership

  • In the case of OPC Registration online, you can transfer the ownership of the company easily to its nominee. At the same time, a sole proprietorship cannot transfer its ownership. It has been inherently tied to the owner.

Sole Proprietorship vs. OPC Registration Company Name

  • For an OPC Registration online, it is mandatory to add the word “(OPC) Private Limited” at the end of the name of the company. A sole proprietorship can run under the name of the owner or under a trade or brand name.

Benefits of Sole Proprietorship & One Person Company Registration

Let’s have a look at the benefits of a sole proprietorship & an OPC Registration in India-

Benefits of OPC Registration Online

  • An OPC online Registration offers limited liability to the owner for the amount that they have invested in the company. Personal assets of the owner of the company are not at stake at the time of business debts.
  • This business structure has been maintained by a single owner, and OPC registration helps the director of the company to manage the business solely. 
  • OPC Registration has been considered as a separate legal entity different from its owner. It provides legal protection that helps secure funds and allows easy access to contracts.
  • OPC Online Registration in India usually has a higher credibility and trust in the business world as compared to the sole proprietorship. It will help in dealing with customers, suppliers, or investors.
  • You can transfer the ownership of a one person company easily by to the nominee of the company. It will facilitate the easy transition of the ownership without disrupting the operations of the company.
  • The maintenance cost of OPC Registration is lower as compared to other business structures.

Benefits of Sole Proprietorship

  • It is the simplest & least expensive business structure that a solo entrepreneur can establish it. You can easily start a sole proprietorship business without the need for registration.
  • There is less paperwork & lower costs included in the setup of a sole proprietorship.
  • A sole proprietorship does not need to pay corporate taxes, and its profit has been taxed as per the personal income of the owner.
  • It is easy to dissolve a sole proprietorship compared to other business structures.
  • The sole proprietor (owner) has the full control on the operations of their company and hence it becomes easy to maintain it single handedly. 

These are the benefits of both business structures. If you have any questions, please contact professionals like Legal Pillers.

Final Words

Both Sole Proprietorship & OPC Registration in India are meant for the solo entrepreneurs and have their own set of advantages and disadvantages. Although both business structures have a lot of similarities, they are different in many aspects. Here, in this blog we had discussed about the major differences between sole proprietorship & single person company registration. If, as an aspiring solo entrepreneur, you have any confusion regarding selecting the right business structure, you don’t need to worry! This blog will clear up all your confusion.

If you still have any query related to the right business structure, you can seek the expert guidance of professionals like Legal Pillers. Legal Pillers has a dedicated team of professional experts with experience in the selection of the right business structure as per your business needs. We will help you to select that as a solo entrepreneur, which business structures among sole proprietorship & OPC registration. So, don’t wait! Choose Legal Pillers as your trusted partner for a successful entrepreneurial journey.

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