Conversion of Sole Proprietorship Firm to One Person Company
by Sowmiya Narayanan Business Consultant
WHAT IS A SOLE PROPRIETORSHIP?
Sole Proprietorship Firm means ownership rest with a single
person. The responsibility and authority of the business enterprise are in the
hands of one person. This form of business suits more to the small traders and
entrepreneurs with small capital requirements and low level of risks.
BETWEEN SOLE PROPRIETORSHIP AND ONE PERSON COMPANY(OPC):
A Sole proprietorship is not a
separate legal entity, the business can be closed at any time when there is any
loss or death of the owner. But on the other hand, a One Person Company, cannot
be closed as you wish, it has a perpetual succession, a nominee has to be
appointed to take care of the company in case of the sudden death of the sole
owner, and in his place another member has to be appointed.
The business of sole
proprietorship firm has involved risk and if they incur any loss, not only the
business property would be attracted but also the personal property of the
owner comes to threat. On the other hand, in OPC, the owner enjoys limited
liability, i.e, the assets of the member would not be attracted if the loss
cannot be covered by the company.
As a unregistered firm, the
Sole proprietorship firm does not has perpetual succession, One Person Company
enjoys the benefit of Perpetual Succession.
OPC structure would be similar
to that of a proprietorship concern without the ills generally faced by the
In One Person Company the
business head is the decision maker, he is not depends on others for
suggestions or implementation of suggestions etc., resulting in quicker and
easier decision making. He is the sole person who runs the business and hence,
the question of consensus or majority opinion etc., does not arise. Similar
benefit enjoyed by the Sole Proprietorship Firms.
OF SOLE PROPRIETORSHIP TO ONE PERSON COMPANY:
There is no formal registration
available for conversion of Sole proprietorship into One Person Company, only
thing you can do is to apply for fresh registration for One Person Company.
A One Person company can be
started with two members, one would be the Director and shareholder or the sole
owner and the other would be the nominee of the proposed company.
OPC can be registered as a
Private Limited Company, where the promoter need to obtain Digital Signature
and director Identification before applying for his company name.
The Company name, which should
be as per the guidelines laid down by the Ministry of Corporate Affairs, has to
be applied to the Registrar of Companies with six names.
The name contains two parts-
Prefix and Suffix, a Prefix should be unique and the suffix should reflect the
business nature of the proposed company.
After the approval of company
name, the final documents such as Memorandum of Association, Articles of
Association along with registered office proof has to be submitted to the
Registrar of Companies.
If the submitted documents
satisfied the RoC, then they would issue the Certificate of Incorporation.
A company registration process
is not over after getting a Certificate of Incorporation, the company has to
intimate the Registrar of Companies regarding the appointment of auditor of his
company within 30 days from the date of incorporation.
OF ONE PERSON COMPANY IN INDIA:
The recent introduction of the concept of One Person company,
has triggered the small scale business people to enter in to company form of business,
where they can enjoy the benefit of Limited Liability, perpetual succession,
separate legal entity and more.
The benefit of using
this concept are as follows:
Reduced paper works and
Flexibility of forming a
company with single member.
There are provisions made for
the conversion of One Person Company into Private Limited Company or Public
Limited Company, if there is induction of more members and by amending the MOA
& AOA of the Company.
The One Person Company concept holds a bright future for small traders,
entrepreneurs with low risk taking capacity, artisans and other service
providers. The One Person Company would act as a launch pad for such
entrepreneurs to showcase their capabilities in the global arena.
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Created on Dec 31st 1969 18:00. Viewed 0 times.