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Proprietorship/ One Person Company

Need help choosing the right business structure for your needs? Contact us today for expert guidance.
Proprietorship One Person Company Registration

    Ready to register your business? Our team is here to assist you with the Proprietorship or One Person Company (OPC) registration process. Get started now!

    Choosing the right business structure is crucial for any entrepreneur. While OPC offers limited liability and the advantages of a private limited company, sole proprietorship provides simplicity and cost-effectiveness.

    OPC vs. Sole Proprietorship

    Choosing the Right Business Structure:

    As an aspiring entrepreneur or business owner, one of the most important decisions you’ll make is selecting the appropriate business structure for your venture. In India, where small businesses operated by a single person are common, two popular options are One Person Company (OPC) and Sole Proprietorship. Both structures have their own set of advantages and considerations, making it essential to understand their differences and choose the one that aligns best with your goals and requirements.

    So, let’s explore the distinctions between One Person Company and Sole Proprietorship, empowering you to make a choice that suits your aspirations and paves the way for business success.

    OPC (One Person Company)

    OPC registration is a preferred choice for small businesses and startups run by a single person in India. This registration provides liability protection to owners, eliminating the need for partnerships. With OPC, an individual has complete control over the business, making it easy to manage.

    OPC is a blend of sole proprietorship and private limited company. To qualify for OPC registration, the individual must be an Indian citizen, and the minimum capital required is approximately ₹1,00,000. However, individuals involved in finance businesses are not eligible. As per the Companies Act 2013, an OPC can be formed with one person, reducing the risk associated with unlimited liability in sole proprietorship.

     

    While a single person can own all the shares of an OPC, an additional nominee director is required. It’s important to note that OPC registration is exclusively available to Indian residents and not applicable to foreigners. OPCs also receive benefits under the Micro, Small, and Medium Enterprises Development Act 2006, including entitlement to three times the interest rate in case of payment delays.

     

    Documents Required for OPC Registration :

    To register an OPC, the following documents must be submitted:

     

    1. PAN or Passport (for foreigners)
    2. ID proof
    3. Address proof (bank statements, electricity, gas, or phone bill)
    4. Photocopy of documents
    5. Signature specimen

     

    Step-by-step Guide to OPC Registration Process:

    1. Obtain a Digital Signature Certificate (DSC) and apply for Director Identification Number (DIN).
    2. Apply for approval of the company’s name from the Ministry of Corporate Affairs (MCA).
    3. Submit the required forms to MCA and obtain the incorporation certificate within a few days.

    Sole proprietorship

    Sole Proprietorship Sole proprietorship is another business structure where a company is operated by a single person. It's a simple and cost-effective setup, often preferred by individuals working from home or managing small businesses. Unlike OPC, sole proprietorship does not require formal registration.

    In sole proprietorship, the owner assumes full responsibility for profits, losses, and legal actions taken against the business. It’s not considered a separate legal entity, resulting in unlimited liability for the owner. Raising capital through debt or equity can be more challenging for sole proprietors. While corporate tax returns are not mandatory, sole proprietors must report personal income tax returns.

     

    Documents Required for Sole Proprietorship Registration:

    For starting a sole proprietorship, the following documents are typically required:

    1. Utility bills of the company
    2. KYC details
    3. Company establishment license
    4. Income tax data

     

    Step-by-step Guide to Sole Proprietorship Registration Process

    1. Apply for a PAN card and register your name as the company’s proprietor.
    2. Create a business account and register as a Small and Medium Enterprise (SME) under the MSME Act. Registration is not mandatory but offers benefits and grants from the government.
    3. If your annual turnover exceeds ₹20,00,000, opt for Goods and Services Tax (GST) registration.

    A Detailed Comparison Between Companies

    Basis Proprietorship Firm Partnership Firm Private Limited Company Public Limited Company Limited Liability Partnership
    Prevailing Law No specific law Indian Partnership Act, 1932 Companies Act, 2013 Companies Act, 2013 Limited Liability Partnership Act, 2008
    Capital Required No minimum amount No minimum amount No minimum amount (Standard 1 Lakh for Pvt. Ltd. Company) Minimum authorized and subscribed capital required No minimum amount
    Name of Entity Any name as per choice Any name as per choice Name to contain ‘Private Limited’ as suffix Name to contain ‘Limited’ as suffix Name to contain ‘Limited Liability Partnership’ or ‘LLP’ as suffix
    Procedure KYC of Proprietor KYC of All Partners KYC of All Directors KYC of All Directors KYC of All Partners
    Apply Tax Registration Prepare, Sign & Notarize Partnership Deed Apply for Digital Signature of Directors Apply for Digital Signature of Directors Apply for Digital Signature of Partners
    Approval and Ready Apply to Registrar of Firms Apply for DIN of Directors Apply for DIN of Directors Apply for DIN of Partners
    Apply Pan Card Apply for RUN for Name Approval Apply for RUN for Name Approval Apply for Name Approval with Form 1
    Approval, Pan Generated & Ready Prepare MOA, AOA & Other Incorporation Documents Prepare MOA, AOA & Other Incorporation Documents Prepare Partnership Agreement & Other Incorporation Documents
    File SPice+ with MCA File SPice+ with MCA File Form 2 & 3 with MCA
    Approval with COI, PAN, TAN & GST Approval with COI, PAN, TAN & GST Approval with COI, PAN, TAN & GST
    Pre-Approval of Name Not Required Not Required Required Required Required
    Registration Any Tax Registration will suffice Optional with Registrar of Firms Registration with Registrar of ROC required (MCA) Registration with Registrar of ROC required (MCA) Registration with Registrar of LLP required (MCA)
    Creation N/A (Not a separate legal entity) Created by contract with 2 persons Created by Law Created by Law Created by Law
    Distinct Entity Not a separate legal entity Not a separate legal entity Is a separate legal entity under the Companies Act, 2013 Is a separate legal entity under the Companies Act, 2013 Is a separate legal entity under the Limited Liability Partnership Act, 2008
    Compliance Complexity Minimal Moderate High High Moderate
    Number of Directors Not applicable Not applicable Minimum 2 Directors Minimum 3 Directors Minimum 2 Designated Partners
    Statutory Audit Requirement Not applicable Not applicable Applicable (based on turnover and other thresholds) Applicable (based on turnover and other thresholds) Applicable (based on turnover and other thresholds)
    Mandatory Annual Filings No Annual Filings required No Annual Filings required Mandatory (Annual Returns, Financial Statements, etc.) Mandatory (Annual Returns, Financial Statements, etc.) Mandatory (Annual Returns, Financial Statements, etc.)
    Ownership Transferability Not possible Not possible Possible Possible Possible
    Foreign Ownership Not allowed Allowed Allowed Allowed Allowed
    Admission as Partner/Member Not applicable By agreement By agreement By agreement By agreement
    Annual Filing Not applicable Not applicable Yes Yes Yes
    Cessation as Partner/Member Not applicable By agreement By agreement By agreement By agreement
    Charter Document Not applicable Partnership Deed Memorandum of Association and Articles of Association Memorandum of Association and Articles of Association LLP Agreement
    Common Seal Not applicable Optional Optional Mandatory Not applicable
    Compliances Few Moderate More More Moderate
    Contracts Personal liability Joint liability Limited liability Limited liability Limited liability
    Credit Worthiness of Organization Personal credit Partners’ credit Separate entity’s credit Separate entity’s credit Separate entity’s credit
    Digital Signature Not applicable Not applicable Required for filing Required for filing Required for filing
    Director Identification Number Not applicable Not applicable Required for directors Required for directors Not applicable
    Dissolution Not applicable By agreement By legal process By legal process By agreement
    Dividend Distribution Tax Not applicable Not applicable Yes Yes Not applicable
    Formalities of Incorporation Not applicable Not applicable Required Required Required
    Legal Proceedings Personal liability Joint liability Limited liability Limited liability Limited liability
    Liability of Partners/Members Unlimited Jointly and severally Limited Limited Limited
    Maintenance of Minutes Not applicable Not applicable Required Required Not applicable
    Number of Members Single owner Minimum 2 Minimum 2 Minimum 7 Minimum 2
    Oppression and Mismanagement Not applicable Applicable Applicable Applicable Applicable
    Ownership of Assets Personal ownership Joint ownership Company ownership Company ownership LLP ownership
    Perpetual Succession Not applicable Not applicable Yes Yes Yes
    Principal/Agent Relationship Not applicable Partners act as agents Directors act as agents Directors act as agents Partners act as agents
    Share Certificate Not applicable Not applicable Issued to shareholders Issued to shareholders Not applicable
    Statutory Meetings Not applicable Not applicable Required Required Not applicable
    Tax Liability Individual tax rates Partnership tax rates Corporate tax rates Corporate tax rates Partnership tax rates
    Transfer of Share/Partnership rights in case of death Not applicable By agreement By transfer of shares/partnership interest By transfer of shares/partnership interest By agreement
    Voting Rights Not applicable As per agreement Proportional to shareholding Proportional to shareholding As per agreement
    Accounting Standards Personal discretion Partners’ discretion Required by law Required by law Required by law
    Annual Compliance Cost Low Moderate High High Moderate
    Audit of Accounts Not applicable Not applicable Required Required Required
    Board Meetings Not applicable Not applicable Required Required Not applicable
    Books of Account Personal records Partnership records Mandatory Mandatory Mandatory
    Borrowing Personal capacity Joint capacity Limited capacity Limited capacity Limited capacity
    Conversion Not applicable Possible Possible Possible Possible
    Foreign Member Not applicable Possible Possible Possible Possible
    Foreign Participation Not applicable Possible Possible Possible Possible
    GST Applicability & Rates Personal capacity Partnership capacity Corporate capacity Corporate capacity Partnership capacity
    Income Tax Individual tax rates Partnership tax rates Corporate tax rates Corporate tax rates Partnership tax rates
    Legal Status Personal Joint Separate legal entity Separate legal entity Separate legal entity
    Liability Limitation No Joint liability Limited liability Limited liability Limited liability
    Managerial Personnel Not applicable Not applicable Required Required Not applicable
    Merger-Amalgamation Not applicable Not applicable Possible Possible Not applicable
    Min vs Max No of Directors 1 to N/A 2 to N/A 2 to 15 3 to 15 2 to N/A
    Min vs Max No of Shareholders/Members 1 to N/A 2 to N/A 2 to 200 7 to unlimited 2 to N/A
    Min vs Max Revenue/Year N/A N/A Varies Varies N/A
    Name Approval Not applicable Not applicable Required Required Required
    Owners Remuneration Personal discretion As per agreement Permissible Permissible Permissible
    Remuneration of Managerial Personnel Not applicable Not applicable Regulated Regulated Not applicable
    Start Up India Not applicable Not applicable Eligible Eligible Not applicable
    Startup Accreditation Not applicable Not applicable Eligible Eligible Not applicable
    Transfer/Inheritance of Rights Not applicable By agreement By transfer of shares/partnership interest By transfer of shares/partnership interest By agreement
    Transferability Not applicable By agreement By transfer of shares By transfer of shares By agreement

    For personalized assistance and guidance in registering your Proprietorship or One Person Company (OPC), contact us today. Our experts will help you navigate the key steps and requirements for a hassle-free registration process, enabling you to take the first step towards starting your business with confidence!