Benefits of One Person Company over Sole Proprietorship

//Benefits of One Person Company over Sole Proprietorship

Benefits of One Person Company over Sole Proprietorship

Businessman are always  revered in the society. This is because businesses create jobs (employment generation) and enable the mobilization of resources. This in turn leads to the development of society. However, single businessman on their own were not given a corporate identity until recently. It was only in the year 2013 that single business owners were given the option to give a corporate identity to the business. With the introduction of One Person Company, sole proprietors can easily convert their business venture into a company. In this article we discuss the benefits of One Person Company (OPC) over Sole Proprietorship.

Sole proprietor refers to any individual person engaged in business. This goes irrespective of the business they undertake. Sole proprietors are sometimes referred to as Small Business Owners. Most notably, they are involved in small scale businesses of retail or other less capital intensive businesses.

A One Person Company is a corporate structure. As the name suggests, there is only one person running the business. However, the total number of members in the company is only one : A Director and investor is the same person generally. This is feasible for businessmen who have a medium scale business. An OPC allows businessmen to grow their businessmen significantly more than a sole proprietorship concern.

Benefits of One Person Company over Sole Proprietorship

  • Business Entity

In an OPC, The owner and the concerned business are two separate entities. Unlike a One Person Company, there is no difference between the business and the proprietor in Proprietorship Firm.

  • Liability

One Person Companies feature limited liability. The liability is limited to the value of investment put in the business. A sole proprietorship concern features unlimited liability. The proprietor has to bear all the losses of the business.

  • Perpetual Succession

An OPC is a separate legal entity. Therefore it continues to exist indefinitely. It is not affected by the death, resignation or retirement of the owner since the nominee takes over the business. A Sole proprietorship concern ceases to exist with the death, retirement or resignation of the person running the business. However, a sole proprietor can pass on the control of the business to someone else.

  • Goodwill

OPCs enjoy goodwill in the market owing to their corporate identity and legal ‘on-paper’ presence. It is easier for OPCs to raise capital. They can also finance their business through bank loans with comparative ease. This is due to the fact that if the OPC defaults, the grievance can be addressed to the ROC or the Tribunal. Sole proprietor firms cannot raise capital with ease.

  • Conversion

OPCs can convert to a Private Limited Company or Public Limited Company. Sole proprietorship firms cannot be converted into a company.

Conclusion

One Person Companies though very similar to Sole Proprietorship, are at the same time quite different. They feature the same foundation however they differ on legal grounds. It is not to say that any one structure is right. They suit different business owners. Sole proprietorship concern is more suited to small business owners operating a small scale business with less capital involved. It is the predominating form of unorganized retail. On the other hand, One Person Companies are more suited to business owners seeking a corporate identity for their business. They specifically are more suited in capital intensive, rapidly growing or medium to large scale businesses.

Do you want to incorporate your own OPC? We Can Help! Reach out to us. At Registration Arena, we help businesses grow. We deal with all of their business issues from compliance and taxation to registration and incorporation. From Trademarks to ISO Registration we do it all.

By | 2020-08-13T21:57:06+05:30 August 13th, 2020|Categories: Uncategorized|0 Comments

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