Difference between Proprietorship and One Person Company (OPC)

Difference between Proprietorship and One Person Company (OPC)

  • By:ARIVAZHAGAN LE INTELLIGENSIA

There is a saying, If you want to be Strong, Fight Alone.

Plenty of people will have a fear of failure too, this fear may be a reason for not starting a business, but many of us break the fear and come up with new business ideas and start a business. If you are the single owner, for creating a business, there are two options, one is a Proprietorship and the other is One Person Company.

In this article, we are going to see the advantages, procedures for formation, and the difference between both.

Proprietorship Firm

A sole proprietorship Firm is the most common and traditional business type in India and all over the world. The form of a proprietorship firm is very simple because there is no complex Government regulation to register a sole Proprietorship Firm as compared with other business entities like a Limited Company or OPC.

How to Register a Proprietorship Firm?

Basically, a Proprietorship firm is not considered as a Separate Legal Entity. Furthermore, there are no specific statutes to Govern a Proprietorship firm. Hence there is no specific registration process, but to show proof of existence, you can register your firm under MSME/Udyam Registration.

Benefits of Proprietorship Firm:

  • Easy to make decisions
  • Flexible to operate
  • Tax Benefits
  • Suitable for New entrepreneurs

One Person Company

One Person Company is the most recent child in the Incorporation Family, which was introduced by the Companies Act, 2013. This is the first time in India to enables one single member to get a company Incorporated through ROC.

Registration Procedure:

The registering authority is ROC, Registrar of Companies

Step 1: Name Approval
Step 2: Obtain Director Identification Number
Step 3: Obtain Digital Signature
Step 4: Submit Documents
Step 5: Registration

What is the difference?

  1. Liability: The primary difference is Liability. The Liability of the Proprietor is unlimited towards business transactions. But whereas the liability of a shareholder is limited to its share value.
  2. Formation: As already said, there is no specific registration required for Proprietorship. Because the proprietorship firm is not governed by any of the statutory legislatures. But whereas the formation of OPC is governed by the Indian Companies Act and the registration carried out by Registrar of Companies (ROC)
  3. Status: The One Person Company is a type of Private Limited Company and the name itself adds a good reputation to the Company and it creates credibility among the clients and vendors.
  4. Continuous existence: On the demise of the Proprietor, the firm life comes to an end, because the business and the proprietors are both one and the same. The PAN of the proprietor is used for business also. But whereas the OPC Is a separate legal entity, hence it cannot be treated as dead until it is winded up through the due process.

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Posted in: One Person Company, Proprietorship
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