Sole Proprietorship:

‘Sole’ means single and ‘proprietorship’ means ownership that means sole proprietorship is a business enterprise owned and controlled by one person who has the entire authority and responsibility of such business. The owner is alone entitled to the entire profit of the enterprise as well as all the liability of the concerned enterprise.


Advantages of sole proprietorship

  • It can be created and dissolved in an easy manner.
  • No cost involved in setting up of sole proprietorship.
  • One person has absolute control over the business and can make quick decisions.
  •  Sole proprietor has the complete control over the finance & profits of business.

Disadvantages of sole proprietorship

  • The business will exist only as long as the owner exists.
  • Since one person owns the business, there are problems with raising of capital funds.
  • As a sole proprietorship has an unlimited liability and therefore in situations where a sole proprietor fails to meet his debts, his personal properties could be disposed off to pay his debts.

 

One Person Company:

A new form of business has been introduced under Companies Act, 2013 , which is a combination of Sole-proprietorship and Company, this is an opportunity for sole proprietors to become a corporate entity. It is thus considered as a private company having a separate legal entity and limited liability.

 

Lets us understand the difference between them:

Basis

Sole- Proprietorship

One Person Company (OPC)

Registration requirement

Not Mandatory

Can be registered under MCA and Companies Act 2013

Corporate existence

No separate legal entity

Separate legal entity

Liability

Unlimited liability

Limited Liability to the extent of share capital

Minimum persons

Sole Proprietor

Minimum 1 person

Maximum persons

Maximum 1 person

Maximum 2 person

Survival

It ceases on the death or retirement of the member

Upon the death of member, nominee appointed by the member shall become the member & responsible for the functioning of company

Tax obligation

Profits are taxed as per individual proprietor’s slab rates

Tax at the rate of 30% on profits plus cess and surcharge. OPC is heavily taxed

Compliances

Income Tax Returns will be filed and audit under Section 44AB is required only if turnover crosses the limit

File annual returns with the registrar of the company and needs to get its accounts audited

Liability to Register for GST
Registration should be done as per the GST provisions
Registration should be done as per the GST provisions