OPC and Sole Proprietorship are types of business entities in India which can be incorporated by just one person. On the other hand, incorporating an OPC or a Sole Proprietorship holds its own advantages and disadvantages. If you are confused about whether to start your business as a One Person Company or a Sole Proprietorship, this article for you.
The following are the benefits of incorporating a One Person Company;
An OPC or One Person Company is incorporated under the definition of a “Private Limited Company” mentioned in section 2(68) of the Companies Act, 2013. Henceforth, an OPC will be required to conform to procurement relevant to private limited companies. Additionally, on the other hand, a One Person Company has been given various exclusions and in this way have a lesser compliance-related burden.
A-One Person Company is an incorporated entity will likewise have the component of perpetual succession and will make it simpler for entrepreneurs to raise capital for business. The OPC, on the other hand, is an artificial entity from its proprietor or owner. Therefore, Creditors should be warned that their claims against the business can’t be squeezed against the owner.
Numerous banks and financial institutions prefer to lend money to the company instead of proprietary firms. Generally, entrepreneurs are required to convert their firm into a Private Limited company before authorizing funds. Therefore, it is ideal to register your startup as a One Person company rather than a proprietary firm.
The yearly return is required to be signed by a director in case of One Person Companies. However, the mandatory requirement of Company Secretary Signature is not applicable to OPCs.
Just the resolution can be conveyed by the member from the organization and entered in the minute’s book and signed and dated by the member. Additionally, such a date should be considered to be the date of the meeting.
An OPC might lead at least one meeting of the Board of Directors in every 50% of a calendar year, and the gap between the two meetings shall not be less than ninety days.
Also, forming a One Person Company holds various disadvantages such as;
As a corporate form, you cannot avail the advantages of tax slabs. In proprietary, you are required to pay at 10%, 20% or 30% tax rate according to your salary. However, in the case of a One Person Company, you are directly charged 30% income tax. The high tax rate is a big disadvantage of one Person Company.
Compliance cost of partnership firm or proprietary is very low compared to One Person Company.
You are required to specify One person company in your company name in the bracket. There is a slightly lower impression that the organization is kept running by one and only person. Another side, in the event that you start your company with a couple of shareholders, the administration can’t be dedicated, and you can offer impressions to customer moreover.
A shareholder is one, and all the decisions are made by a person. On the off chance that he is insightful, it is great; however, in some cases, cross-check is required for business development. Company’s success and growth are all dependent on one person’s decision-making ability.
You can incorporate one and only OPC (One Person Company). In the event that you need to start another company as OPC, it is not permitted. In today’s quick economy, more than one business can differentiate income and spare you from enormous misfortunes. One and an only stream of pay or business is unsafe these days. Having this condition is a snag for serial business people.
There is the procurement of automatic conversion of One Person Company into Private Limited Company. In the event that you appraise high turnover of your business, or you have effectively high turnover, the better choice is to build up a private limited company than One Person Company. Setting up OPC and after in some cases, conversion of one person company into Private Limited Company is not a good idea.
Read our article: A Complete Guide on One Person Company Registration in India
Benefits of Forming a Sole Proprietorship are as follows;
Mentioned below are some of the disadvantages of a Sole Proprietorship Registration;
The Companies Act, 2013 introduced a new type of business, which was a hybrid of Sole-proprietorship and Company. Additionally, by providing sole proprietors with an opportunity to enter into a corporate world. It is treated as a private limited company only having a separate legal entity and limited liability. Furthermore, One Person Company Registration, which is a new concept in India, already has seen a big boom. One Person Companies are helping tremendously in increasing the overall economy of India. A huge impact on the economy and development of the nation is expected. It gives opportunities to many and will, therefore, bring creative and young minds in front of everyone.
Sole Proprietorship is the simplest type of business, commenced by individuals who are personally liable for debts. Furthermore, a sole proprietorship is not a legal entity like a partnership or a corporation. However, a sole-proprietor can apply for company registration under his name or under a fictitious name. Furthermore, the costs are nominal to start this kind of business. However, the disadvantage lies in the situation of financial failure. In case the business fails to earn a profit, then creditors can file a lawsuit against sole-proprietor. Business liability can apply against his personal assets. But, if the owner dies, there are little chances of survival of the entity. Expansion of business after a point becomes a difficult job. Also, the advantage is this kind of entrepreneurs need not need to hold board meetings and annual meetings. Also, Returns are signed under their name, and they have flexible working hours. Therefore, a Sole proprietorship and a One person company are very different from each other.
Read our article: Everything you need to know about One Person Company