Difference Between OPC and Sole Proprietorshipby Compliance Calendar LLP compliance calendar
SOLOPRENEURSHIP: A WAY TO GROW MORE THAN YOUR BUSINESS
When we talk about solopreneurship, it is much more than merely selling products and making profits out of it. Where on one hand solopreneur enjoys independence and autonomy on the next, he is no less than a juggler and his entrepreneurial journey is no less than a roller coaster ride. He needs to check the A to Z of his business with minimal delegation of his responsibilities. He is his entity’s primary financial adviser, accountant, manager, business analyst, marketing agent and what not.
What is the oldest form of business structure?
When this question arises, the common answer is sole proprietorship.
Solopreneur ship refers to the least complex and most common business structure of a small business entity. It is owned and fully controlled by a single individual in contrast to partnerships and company. It is the easiest way to start a business entity as it has least government intervention and whole control of the business in one hand and that’s what makes it most popular among the professionals and sole contractors.
One Person Company (OPC): Modernized version of Traditional sole proprietorship
In general sense, One Person Company Registration refers to a private company in which there is only on member(shareholders) and entire stake his held by him alone.
As per section 2(62) of Companies Act, 2013
“One Person Company (OPC) means a company which has only one person as a member.”
Though both forms appear similar to each other at first sight however they is a plethora of differences. In this article we will make a comparative analysis of both alternatives of solo business.
Points of Difference between Sole Proprietorship and One Person Company (OPC).
Sole Proprietorship: It is the traditional form of business, which has its roots from the ancient era, whenever we try to picturize a businessman in ancient times only one image comes into our minds, and that is of a shopkeeper who is selling his items. This is what we call sole proprietorship.
One Person Company: One Person Company (OPC) is corporatized form of sole proprietorship, which is way more organized and is a good blend of sole proprietorship and that of a company.
The concept of OPC is not alien to the world. Through the years, this concept has been induced in UK, USA, China, Singapore, Turkey, UAE and Pakistan.
However, in India, it was legally introduced in year 2014 with introduction of new Companies Act, 2013.
2. Emergence and Governance
Sole proprietorship: there is no law as of now to legally govern the sole proprietorship. There are no filings or compliance requirements.
One Person Company: In India the concept of OPC induced in year 2005 in Dr J.J Irani Committee report. It promised the escalation of entrepreneurs in the marketplace, making their contribution in the economy widely effective.
The concept of OPC legalized with introduction of Companies Act, 2013 and now OPCs are governed by provisions of Companies Act, 2013.
OPCs are regulated by Registrar of companies (ROC) a wing of Ministry of corporate affairs (MCA).
3. Corporate Form of Entity
Sole proprietorship: Sole proprietorships are not corporate bodies therefore, they are deprived of the merits of being a corporate, some of which are as follows:
· Personal Liability protection
· Business security and perpetuity
· Tax benefits etc.
One Person Company: OPCs are corporatized form of sole proprietorship, which gives benefits of both sole proprietorship and that of a body corporate, therefore it won’t be wrong if we call it a hybrid of sole proprietorship and company.
And being a corporate body, it will be having following features:
· Separate legal entity
· Perpetual succession
· Limited liability
· Transferability of shares etc.
4. Taxation Aspects
Sole proprietorship: For the purpose of Income Tax Act, 1961 there is no difference between sole proprietor and his business, whatever he earns from his business in the form of profits is taxed in his individual capacity.
One Person Company: It is registered as a private limited company for the purpose of Income Tax At, 1961. Therefore, under Income Tax Act, OPC is charged separate from that of its proprietor.
5. Business Succession
Sole proprietorship: The business of sole proprietor ends with his death or incapacity, there is no specific provision for transferring succession of sole proprietorship business.
Even if succession certificate is issued under Indian Succession Act,1925 by local court, it is related to assets distribution only, business comes to end after death of proprietor.
One Person Company: On the other hand, OPCs are body corporates with an identity distinct from that of its members and perpetual succession, which means identity od company remain intact and is transferred to nominee of the OPC in the event of death or incapacity of the sole member.
FAQS ON SOLE PROPRIETORSHIP AND OPCS FORM OF BUSINESS ENTITY
there any specific Act which governs the sole proprietorship form of business
No, as on date there is no specific Act which regulates the sole proprietorship form of business entity. It is governed by general provisions of Indian Contract Act.
· What are the advantages of OPC registration in India?
Following are the major advantages of OPC registration:
· Separate legal entity
· Transferability of shares
· Limited liability
· Professional image
· Better excess to credit
· What is the fees for OPC registration?
· Fees For Name Reservation- Rs. 1000
· Stamp duty on MOA and AOA- depend upon the authorized share capital of the company and state in which it is proposed to be registered.
· Payment for PAN/TAN- Rs.65 for PAN and Rs.66 for TAN
· Professional fees- decided at the discretion of professional
Thank you for giving your valuable time, hope you liked this write up. If you have any queries or suggestions for us, kindly write us in the comment section.If you yourself looking for professional help regarding OPCs registration procedure, kindly write us at Compliance Calendar LLP at email@example.com or 9988424211 and we will be happy to assist you in your startup journey
Created on Aug 6th 2022 01:15. Viewed 49 times.