An OPC is a company that is limited by shares and run by a single person. This type of business structure is usually preferred by entrepreneurs or proprietors who do not have the benefit of forming a limited liability due to the non-availability of a second member or shareholder.
A Sole Proprietorship is an entity that is owned and run by an individual and there is no distinction between the owner and business.
The difference between an OPC and Sole Proprietorship is as follows
- Registration OPC- Before starting off a business, you need to get your business registered. Sole Proprietorship – This particular criterion is not a prerequisite.
- Entity OPC – The entity is totally separate from its members.
- Limited Liability OPC– The owner has a limited liability if the business suffers a loss. Sole Proprietorship – It has unlimited liability which means that the assets of the owner will be used to pay off the debts of the business suffers a loss.
- Taxation OPC -It is taxed in line with the provision of income tax for the Private Limited Company. Sole Proprietorship -The taxation for a sole proprietorship is different as the income of the company is treated the same as that of the owner and income tax is levied accordingly.
- Succession OPC- It needs to have a nominee designated by its members. The nominee must be a resident and a citizen of India by birth. The nominee becomes a member of the company and will be responsible for running the businesses in case of death of the member. Sole Proprietorship- It can take place only through the execution of the last testament or will in case of a sole proprietorship.
- Compliances – OPC – It automatically gets converted to a private limited company if its paid up shares exceeds Rs 50 lakhs and the average turnover for any three consecutive financial year is more than Rs 2 crore. Sole Proprietorship- Conversion of a sole proprietorship to a private limited company involves a lot of complications.
- Conversion – OPC – It automatically gets converted to a private limited company if its paid up shares exceeds Rs 50 lakhs and the average turnover for any three consecutive financial year is more than Rs 2 crore. Sole Proprietorship- Conversion of a sole proprietorship to a private limited company involves a lot of complications.
- Brand Value – OPC – It has a brand value as it is registered under the Companies Act and gets a registration certificate.
- Foreign ownership- OPC- Foreign ownership is allowed only if one of the members is the director and the other is a nominee. A foreigner cannot hold the position of both a director and the nominee. Sole Proprietorship- Foreign ownership is not allowed in a sole proprietorship.
- Transferability OPC- Transferability is allowed to 1 person.Sole Proprietorship – Transferability inProprietorship is not allowed.
An OPC and a sole proprietorship have pros and cons of their own. If you’re confused over which business entity suits your business the best, you can get in touch with the professionals at Aavana who will help you choose the best business entity based on your requirement.
For more details, call us at +91-9900328729, +91-80-40909797.