One person Company and Sole Proprietorship sounds similar to words. But in reality, both are different from each other. OPC is different from Sole Proprietorship in terms of law and workings. If you want to start a new business and you are not able to pick one form then here is a glance of differences  between One person Company and sole proprietorship  are as follows:

Sole proprietorship

The simplest form of business carried on by individuals who are personally liable for debts. A sole proprietorship is not a legal entity like a partnership or a corporation. Therefore, A sole-proprietor can start a business under his name or under a fictitious name. Costs are nominal to start this kind of business, however, the disadvantage lies with financial failure situation. If the business fails to earn a profit then creditors can file a lawsuit against sole-proprietor. Business liability can be discharged against his personal assets. However, if the owner dies, there are little chances of survival. Expansion of business after a point becomes a tough job. The advantage is this kind of entrepreneurs need not enter into board meetings and annual meetings. Returns are signed under their name. They have flexible working hours.

One Person Company (OPC)

The Companies Act, 2013  introduced a new form of business, a hybrid of Sole-proprietorship and Company, by providing sole proprietors with an opportunity to enter into a corporate world. It is treated as a private company only having a separate legal entity and limited liability. Every one person company shall have to at least hold one meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings is not less than ninety days.

One Person Company And Sole Proprietorship

TYPE OF COMPANY

BASIS

ProprietorshipOne Person Company
RegistrationNot CompulsoryCan be registered under MCA and Companies Act 2013
Legal status of entityNot considered as a separate legal entitySeparate legal entity
Members liabilityUnlimited liabilityLimited to the extent of share capital
Minimum number of memberSole ProprietorshipMinimum number of 1 person
Maximum number of membersMaximum 1 personMaximum 2 person
Foreign ownershipNot allowedAllowed if one is the director and the other is the nominee. Both the director and the nominee cannot be foreign citizens
TransferabilityNot allowedAllowed to 1 person only
Survivalcomes to end on death or retirement of the memberExistence is independent of directors or nominee
TaxationTaxed as an individualTax rate is 30% on profits plus cess and surcharge
Annual filingsIncome tax returns with the registrar of the companyFiled with the registrar of the company

Conclusion

OPC is different from Sole Proprietorship in terms of law and workings. One person Company and Sole Proprietorship sounds similar to words. OPC is treated as a private company only having a separate legal entity and limited liability.“One Person Company” is a company which has only one person as a member. And it is treated like a private Company. Every one person company shall have to at least hold one meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings is not less than ninety days. A sole proprietorship is not a legal entity like a partnership or a corporation. The advantage to sole proprietors kind of entrepreneurs need not enter into board meetings and annual meetings. Returns are signed under their name. They have flexible working hours. Income and losses are taxed on the individual’s personal income tax return. It simply refers to a person who owns the business and is personally responsible for its debts.