What is the Difference Between Sole Proprietorship Vs One Person Company (OPC)
Both proprietorships and OPCs offer simplicity in their structures with single-person ownership. However, the main differences lie in liability, taxation, and legal formalities. Proprietorships offer simplicity but come with unlimited personal liability, while OPCs provide limited liability protection to the owner but involve more legal formalities and are taxed as per corporate tax rates.
Features
Legal Structure
- Liability
- Management
- Taxation
- Legal Formalities
- Minimum Members
- Business Name
- Continuity
- Tax Deductions
- Compliance
Proprietorship
Owned and managed by a single individual.
- Proprietor bears unlimited personal liability.
- The proprietor has complete control over operations.
- Profits taxed as the proprietor's personal income, subject to personal income tax rates.
- Personal income tax rates range from 0% to 30% based on income slabs.
- Minimal legal formalities required for setup and operation.
- Can be formed and operated by a single individual.
- Fewer formalities, simpler compliance.
- Continuity depends on the proprietor's desire to continue or cease operations.
- Considered an extension of the owner.
- Fewer compliance requirements compared to OPC.
OPC
Owned and managed by a single individual.
- Owner's liability is limited to the investment in the OPC.
- The owner has full control over business decisions.
- Taxed at corporate tax rates applicable to companies, which may be lower than personal income tax rates.
- Corporate tax rates are 25% for companies with turnover up to ₹400 crore; otherwise, 30%. Additionally, surcharge and cess may apply.
- More legal formalities, including registration and compliance with company law.
- Requires at least one director and one nominee.
- More formalities, compliance requirements may be more complex.
- Continuity is ensured, separate from owner's existence.
- Separate legal entity from its partners.
- Requires adherence to statutory compliances as per company law.
