OPC v/s Sole Proprietorship

If you are starting a new business and unable to decide whether to start as OPC or sole proprietorship, the following differences between the two OPC v/s Sole Proprietorship will help you to decide the type of company to be formed.

Sole proprietorship is the simplest form of business. It is not a legal entity. It simply means a person who owns the business and is personally responsible for its debts. Sole proprietorship can also operate under the name of its owner or it can be under a fictitious name. It is easy to set up at nominal cost and sole proprietor need not register for the business.

Whereas OPC is defined under sec 2(62) of The Companies Act which Means an individual person can now constitute a Company under this concept. In the simplest form, One Person Company means a company with only one person as a member. He will be the shareholder of the company and avails all the benefits of a private limited company. An OPC is classified as a private company under Companies Act.

OPC v/s Sole Proprietorship

Particulars

OPC v/s Sole Proprietorship

One Person Company  Sole Proprietorship
Suitability Suitable for mid sized business. Suited for small business.
Promoter’s Liability Liability is limited. It is to the amount of capital invested or the share holds in the company. Liability is unlimited. Owner is liable for all the debts and liabilities of  business
Legality Has a separate legal entity. Not has a separate legal entity.
Governed by Companies act NA
Level of Protection  It is protected as s in case of default; the creditors cannot sell the personal assets of the owner for the recovery. Since, it is not a separate legal entity. It is unprotected as creditors can sell the personal assets of the owner for the recovery.
Registration Has to be registered by ROC and it will provide certificate. No registration required.
Name OPC shall be mentioned below the name of the company. No guidelines provided.
Minimum no of directors 1 director No guidelines
Min. no of shareholders 1 person. NA
Start up Costs It is comparatively higher around Rs. 15,000. Owner has to pay the cost of incorporation of company, Digital signature Certificate as well VAT/service tax registration number cost. It is lower around Rs. 5000. Owner has to pay the cost of VAT registration and License under Shops & Establishments Act.
Business Registration Certificate OPC can easily form a company to get its business registered with registrar of companies as a separate legal entity. After registration a certificate of incorporation will be issued as a proof of registration. Generally sole proprietorship businesses are not registered with government of India except few businesses.
Taxation Taxes payable at a flat rate of 30% on profits. You have to pay Dividend Distribution Tax (DDT) and Minimum Alternate Tax. Sole proprietors must pay at the individual slab rate, but do have some conveniences; for example, if your turnover is less than Rs. 1 crore, you can declare profits at a flat 8%.
Minimum share capital Minimum paid up capital required to form a One Person Company is Rs.100000. No such requirement.
Meetings 1 board meeting in each half year. No requirement of annual general meeting. NA
Annual Compliances In addition to maintaining books of accounts, they have to get their statements and record audited, do annual filings and inform the necessary changes in structure of the company to Registrar of companies. It would cost around Rs. 10,000 annually on compliances. Undoubtfully, sole proprietors have to maintain their books of accounts and file income tax returns as annual compliance.
Conversion It can be converted into Public or Private company. NA