When an individual wants to start his business solely, he has two options available either to do business as sole proprietorship or One Person Company. Both these forms of business structures have their own benefits and risks involved. For the ease of understanding the concept and to take a rationale decision here is a difference between the two in terms of its features:
| Particulars | OPC | Proprietorship Firm |
| General Meaning | One Person Company means a Company which has only one person as a member. | It simply refers to a person who owns the business and is personally responsible for its debts. |
| Entity | Separate Legal Entity | No Separate Legal Entity |
| Governing Act | Companies Act, 2013 | It isn’t governed by any specific laws |
| Business Registration | Mandatory registration with the MCA | Not mandatory. It can be registered under MSME, Shop & Establishment, GST, Professional Tax, IEC, etc. Because there is no specific Act for it. |
| Ownership | Individual Shareholder | Individual Proprietor |
| Management | Directors manages the Company which Collectively referred as “Board of Directors”. | Proprietor is the sole person who manages the firm however he may hire employees to support. |
| Liability | The owner and the business are considered as two separate entities. Therefore, the owner’s liability is limited to his/her investment in the Company. | Since the owner and the business are considered as single entity, if the business incurs losses the owner is liable for all of it. |
| Compliances | OPC has to ensure some compliances as prescribed under the Companies Act, 2013. | The compliances are minimal and easy to fulfil. |
| Cost for setting up | Higher than Sole Proprietorship but not so expensive. | Nominal |
| Audit | Required | Not required until turnover exceeds 1 crore |
| Tax Structure | Taxed under the Income Tax Act as Private Company | Taxed as Individual’s income. |
| Existence or Survivability | Existence of an OPC is not dependent on the Director or Shareholder. A nominee can be assigned to run the Company. | Existence of business ends with the death of the owner. Succession can only take place through will. |
| Transferability | Allowed to 1 person only | Not allowed |
| Bank funding | Possible and higher chances than Proprietorship. | Less chances than OPC. |
| Repayment of Loan | Repayment of Loan is not the sole responsibility of the OPC | Repayment of Loan is the sole responsibility of the of the owner |
| Goodwill | Good because an OPC has separate legal status and is considered as a Company under Companies Act, 2013 | Not impressive because no separate legal status |
| Transparency | Yes due to regular disclosures with authorities | Very rare |
| Expansion | Can convert in to Big Pvt Ltd or Ltd Company voluntary subject to regulations laid down. | Very Less Chances to scale up the business. |
| Conversion | A One Person Company should mandatorily convert itself into a Private Limited Company or a Public Limited Company (as the case may be) if the average annual turnover for three years exceeds the threshold. | A sole proprietorship firm cannot be converted into any other business structure. |
| Unique Name | OPC will have a unique name. It is different from any other entity. And any other person cannot use a similar name for its business. | One can start firm with any name. It can create confusion for the customer if the names of firms are similar. |
| Name Protection by MCA | Protected by MCA | No Protection |
| Public data | The data of the OPC are available on the MCA portal. The constitutional documents such as MOA and AOA are also available in the public domain. | One cannot find the data of the firm anywhere. |
| Recommended For | For every entrepreneur who wants to do business in organized form and wants to take benefits of Corporate structure. | Unorganized Sector |
One can choose between sole proprietorship and OPC depending on their requirements, type of business and the risk involved in the business as both holds its own advantages and disadvantages.
