What is the difference between an OPC company and Proprietorship Company?


What is the difference between an OPC company and Proprietorship Company?

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One of the critical decisions every entrepreneur must take before setting up their business is deciding on the right legal structure. This article compares two popular structures, the OPC and Proprietorship, to help you make an informed decision based on your unique circumstances. We analyze the differences between these two structures in terms of legal identity, liability, ownership, and governance, helping you select the best option for your business model.

OPC (One Person Company) is a type of company registered under the Companies Act of 2013. It allows for one shareholder/owner who will be the director and shareholder of the company. A Sole Proprietorship and OPC are two different types of business structures available to entrepreneurs. Both are similar in many ways and have their own perks. However, the major difference between OPC and Proprietorship is in terms of Liability.This is an ideal way to set up a small business with minimal costs and compliance requirements.

The primary advantage of an OPC over a sole proprietorship is that it offers limited liability. This means that the owner's personal assets are protected in case the company is unable to repay its debts. However, it should be noted that the owner must have sufficient funds to cover potential losses.

In addition to limited liability, an OPC has a formal corporate identity, which can be beneficial when dealing with clients, customers, or investors who may prefer working with a formally established entity.

Another benefit of an OPC is that it can be converted into a private limited company or other types of companies with ease, subject to fulfilling the necessary compliances. The shareholder or nominee of an OPC must also be a natural person and be an Indian resident. However, it is important to note that a minimum of 50 lakhs share capital is required for the conversion.

 

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