The realm of business structures often pits sole proprietorships against One Person Companies (OPCs), each offering distinct advantages and considerations. While sole proprietorships operate with simplicity and autonomy, OPCs navigate a more regulated landscape, ensuring legal compliance and offering limited liability. This analysis delves into the contrasting features of both entities, shedding light on their formation, legal status, liability, taxation, and operational nuances.
As per Section 2(62) of the Companies Act, 2013, One Person Company means a company which has only one person as a member, in simple terms One Person Company are basically a substitution of sole proprietorship concern formed in a more legal and lawful manner having one person as the director.
The most straightforward type of business that an individual can operate is a sole proprietorship, which is not governed under any law. A sole proprietorship’s founder bears personal responsibility for the proprietorship’s debts. A sole proprietorship can be started for very little money and with few requirements it is more like a One Person Company with no legality obligations.
Basic Requirements for Formation of a Sole Proprietorship Concern:
1. Open a Current Bank Account with any Nationalized Bank
2. Apply for Trade Licenses from https://silpasathi.wb.gov.in/ (in case of West Bengal)
3. Apply for Shop and Establishment Licenses https://wbshopsonline.gov.in/ (In case of West Bengal)
4. Apply for Professional Tax https://wbprofessiontax.gov.in/ (in case of West Bengal)
5. Goods and Services Tax can apply on voluntary basis, if specified limit cress then have to apply mandatorily.
Basic Requirements for Formation of One Person Company:
For incorporation of a One Person Company the following documents shall be required:
| Sl No. | Documents Required |
| 1 | Digital Signature Certificate of the proposed director |
| 2 | PAN, Aadhar Card/Voter Id of the proposed director including its nominee |
| 3 | Bank Statement/ Utility Bill (not older than 2 months) |
| 4 | Company registered office utility bill |
| 5 | Email id & contact number of the proposed director |
| 6 | Passport Size Photo Copy, Signature On Plain Paper of the proposed director |
Difference Between Sole Proprietorship and One Person Company:
| Particulars | Sole Proprietorship | OPC |
| Registration | No compulsory registration (as mentioned above) | Should be registered under the Companies Act, 2013 on the MCA website (as mentioned above) |
| Legal status | Does not have a separate legal status | Has a separate legal status |
| Members liability | Sole proprietor has unlimited liability | Member has limited liability |
| Nominee | Does not require a nominee | Requires a minimum of one nominee to establish an OPC |
| Directors | No directors required | Minimum of one director and one nominee is required |
| Foreign ownership | Not allowed | Allowed when one is the director and the other is the nominee but both cannot be foreign citizens |
| Transferability | Cannot be transferred | Can be transferred to the nominee |
| Taxation | Taxed in the individual slab rate, as per income tax regime. | Tax rate is 30% on profits plus cess and surcharge. |
| Annual filings | Mandatorily Filing of only income tax returns | Filings with the Registrar of Companies (ROC) as per the Companies Act, 2013 and Income Tax Act |
Consequently, it is evident that OPC and sole proprietors differ from one another. Even though an OPC and a single proprietorship only have one member, they operate differently. OPC possesses corporate characteristics, but a sole proprietorship lacks these advantages. Because of this, the business does not enjoy perpetual succession and the lone proprietor is subject to infinite liability.
The OPC is the ideal option for those who wish to launch a company within a corporate framework while maintaining practical control over every aspect of the company’s activities. You may grow the business while maintaining little responsibility.
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Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a piece of professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.
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