Points of Distinction

Sole Proprietorship

One Person Company (Pvt Ltd)

Regulation

General

Specific – Companies Act, 2013

Type of Structure

Plain Vanilla

Hybrid (Proprietorship + Company)

Business Registration

Not mandatory however Sectoral licenses are required as may be applicable to a particular business.

Mandatory Registration with MCA

Name

Generally Proprietor uses his own name

Must Contain word “OPC”to distinguish itself from other entities.

Entity

No Separate Legal Entity

Separate Legal Entity

Liability

Unlimited

Limited

Minimum Members

1

1

Maximum Members

1

1

Nomination

Optional

Mandatory nomination of 1 natural person to form an OPC.

Directors

Not Applicable

Minimum=1

Maximum= 15 unless increased

Type of Structure

Sole Form

Corporate Structure

Ownership

Individual Proprietor

Individual Shareholder

Management

Proprietor is the whole and sole person who manages the firm however he may also hire employees to support.

Directors Collectively referred as “Board of Directors”.

Charter Documents

Not Specific

Memorandum and Articles of Association

Bank Funding

Very rare chances

Possible and higher chances than Proprietorship.

Foreign Direct Investment

——–

———

ROC Compliances

Not Applicable

Applicable but less as compared to a pure Pvt Ltd or Public Company (i.e big companies)

Statutory Audit under Companies Act

Not Applicable

Mandatory

Income Tax Compliances

Simple because taxed as Individual

More Compliances because taxed as a Company

Indirect Tax Compliances

Depends upon various factors

Depends upon various factors

Goodwill

Not Impressive because no separate legal status

Good because an OPC has separate legal status and is considered as a Company under Companies Act, 2013

Transparency

Very rare

Yes due to regular disclosures with regulatory authorities.

Conversion

——-

Must Convert in to either Pvt Ltd or Limited Company after crossing certain threshold

Expansion

Very Less Chances to scale up the business.

Can convert in to Big Pvt Ltd or Ltd Company voluntary subject to regulations laid down.

Liquidation

On the death of a proprietor

Only through Legal Process

Cost for Setting Up

Nominal

Greater over Sole Proprietorship but not so expensive.

Name Protection by MCA

Not Protected

Protected by MCA

Recommended For

Unorganized Sector

For every entrepreneur who wants to do business in organized form and wants to take benefits of Corporate structure.