One Person Company vs Sole Proprietorship


If you want to start a new business but confused in deciding whether One Person Company or the Sole Proprietorship is best, then this article is definitely for you. In this article, we will take an overview of some differences in sole proprietorship and one person company to help you understand which one suits you the best. So let’s begin!

 A-One Person Company is a company, which is limited by shares and is owned and managed by a single person all by himself. Whereas a sole proprietorship is an enterprise, which is also managed and owned by a single person but there is no legal distinction between the sole owner and the business entity. 

OPC vs Sole Propritorship

Assets & Liability: 

In a sole proprietorship, the liabilities of the business are unlimited. This states, if the business incurs any losses, then the debts will be paid by using the assets of both the company and the owner. However, if the business suffers from losses in OPC, the liabilities at the owner’s end will be limited as the OPC is a separate legal entity.


The One Person Company concept was introduced through the Company Act of 2013 and is treated as a Private Limited Company and also there are no separate tax provisions made for OPC in the Income Tax Act, therefore it is subjected to taxes accordingly as a Private Limited Company. For Sole Proprietorship, the taxation process is different as the income of the business is treated as the income of the sole owner and thereby subject to taxes accordingly. 


In OPC, the members of OPC must designate a nominee in order for the succession of the OPC. So, if the member of the OPC dies, the privilege for running the OPC will be then passed down to the nominee. Given that, the nominee should necessarily be a citizen of India (Resident Indian Citizen). On the other hand, there is no difference between the business and the sole owner in a sole proprietorship. Hence, the succession of a sole proprietorship can only be carried out by testament and execution of the will, which may or may not is challenged by the court of law. 


A-One Person Company should mandatorily comply with all the necessary annual compliances as a Private Limited Company and must audit its financial accounts and file its annual returns in the stipulated time period. However, the sole proprietorship is required to audit its account under section 44 AB, only if its annual turnover crosses the threshold limits, which may be specified under the provisions of the Income Tax Act. 

One person company


The conversion of One Person Company into a Private or Public Limited company is allowed, only when it has a paid-up share capital of over Rs. 50 lakh and the average turnover exceeds 2 crores for three consecutive years. On the contrast, the sole proprietorship is unable to convert itself into neither public nor private company, irrespective of the revenue it earns. 

If you want to know more about one person company registration, then we have a detailed guide on it. Please don’t forget to take look at it.

Wrap it up! 

From above, we can see that both One Person Company and Sole Proprietorship got its own pros and at the same time some disadvantages too. One has a simple registration process and on the other complex taxation process. While the other has simple registration but complex compliances to be fulfilled. Therefore, it’s not easy to conclude which one is best, the OPC or the Sole Proprietorship. Although, the decision remains up to you. But if you are having any complications or queries related to the above forms of company, then you can contact us through the comments section. 

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