Difference between One Person Company, Sole Proprietorship and Limited Liability Partnership

Difference between One Person Company, Sole Proprietorship and Limited Liability Partnership

OPC, as the name suggests, means only one person (owner) is involved as a member, acting as both a shareholder as well as a director even as the director count can go up to 15

OPC, as the name suggests, means only one person (owner) is involved as a member, acting as both a shareholder as well as a director even as the director count can go up to 15

One Person Company

One Person Company

OPC allowed many aspiring entrepreneurs to start their businesses and take riskier bets without affecting or suffering a loss of personal assets since the liability of OPC is limited to the extent of the value of the share the owner holds

OPC allowed many aspiring entrepreneurs to start their businesses and take riskier bets without affecting or suffering a loss of personal assets since the liability of OPC is limited to the extent of the value of the share the owner holds

During OPC registration, the person is required to appoint a nominee who will act as the shareholder in the event of his/her death

During OPC registration, the person is required to appoint a nominee who will act as the shareholder in the event of his/her death

However, in case the company’s average turnover for three consecutive years exceeds Rs 2 crore or the paid-up share capital goes beyond Rs 50 lakh, it is mandatory for the company to convert into a private or public company

However, in case the company’s average turnover for three consecutive years exceeds Rs 2 crore or the paid-up share capital goes beyond Rs 50 lakh, it is mandatory for the company to convert into a private or public company

Sole proprietorship

Sole proprietorship

Similar to an OPC, a sole proprietorship also has an individual on the top, however, the person is also liable for all the debts. This means that the liability is not limited unlike in an OPC and hence, the person bears all the losses as much as he enjoys all the profits

Similar to an OPC, a sole proprietorship also has an individual on the top, however, the person is also liable for all the debts. This means that the liability is not limited unlike in an OPC and hence, the person bears all the losses as much as he enjoys all the profits

A proprietor can claim business gains and losses on his/her own individual tax return instead of the company filing its own tax return. Moreover, a sole proprietorship is taxed using individual income tax rates rather than corporate, thus making tax obligations simpler and cheaper

A proprietor can claim business gains and losses on his/her own individual tax return instead of the company filing its own tax return. Moreover, a sole proprietorship is taxed using individual income tax rates rather than corporate, thus making tax obligations simpler and cheaper

Sole proprietorships don’t require a director and a nominee except a member. There is also no need for board and annual meetings and annual audits, making it easier to operate from a compliance perspective

Sole proprietorships don’t require a director and a nominee except a member. There is also no need for board and annual meetings and annual audits, making it easier to operate from a compliance perspective

Limited Liability Partnership

Limited Liability Partnership

LLP is among the popular business forms adopted because the liability of the partners is limited to the contribution made by them. Partners won’t be personally liable for any business loss. LLP protects their personal assets from business liabilities

LLP is among the popular business forms adopted because the liability of the partners is limited to the contribution made by them. Partners won’t be personally liable for any business loss. LLP protects their personal assets from business liabilities

A LLP is also easier and cheaper to run with only two annual compliances – filing annual returns by May 30 every year and solvency statements by October 30 every year

A LLP is also easier and cheaper to run with only two annual compliances – filing annual returns by May 30 every year and solvency statements by October 30 every year

The fine for non-compliance can be up to Rs 5 lakh for a year. An LLP has to file income tax return and annual return every year even if it is dormant. The inability to file Form 8 or Form 11 (annual filing) attracts Rs 100 per day fine, per form

The fine for non-compliance can be up to Rs 5 lakh for a year. An LLP has to file income tax return and annual return every year even if it is dormant. The inability to file Form 8 or Form 11 (annual filing) attracts Rs 100 per day fine, per form

Image: Pexels

Image: Pexels