Despite their similar names, One Person Company and Sole Proprietorship have different functions. So here is some comprehensive advice if you are starting a business and are still deciding which firm to choose.
What is a One Person Company?
An OPC is a hybrid kind of organization that combines aspects of a Private Limited Company and a Sole Proprietorship. A one-person company has limited liability and is considered a separate legal entity. The Companies Act of 2013 governs the OPCs. Every OPC is expected to hold at least one board of directors meeting every six months.
Documents Required For One Person Company Registration
It is necessary to submit the following documents for a one-person company registration in India:
- PAN(Permanent Account Number) card copy of the owner, a passport-sized image of the concerned owner
- A copy of the owner's driving licence, voter ID card, or Aadhaar card
- A copy of the rental contract (If in case a rented property)
- Water Tax or Electricity Bill of the Registered Office
- A copy of the deed or other evidence of ownership (In the case of an owned property)
- Certificate of No-Objection from the Real Owner
Process of Online OPC Registration
Below are the following steps which you need to follow for online OPC registration in India:
Step 1: Apply for DSC and DIN
The following documents are needed to complete the first step of online OPC Registration and obtain the Digital Signature Certificate of the Director (DSC).
The proposed director's Aadhaar card/ address documentation/ most recent photograph/ email address/ phone number/ and PAN Card are all required.
Once the DSC is created, the next step is to obtain the proposed director's DIN or Director Identification Number, in the SPICe Form, along with the director of the company's identification and address verification. The alternative is only available to current corporations is Form DIR-3. No separate Form DIR-3 filing is required from the candidate. Now, up to 3 directors may apply for a Director Identification Number within the SPICe Form.
Step 2: Application for Name Approval:
The company's name is decided after getting DSC and DIN. With the help of the SPICe+32 Form firm's name can be approved. In the SPICe+ 24 Application Form, only one preferred name may be listed, along with a note about how crucial it is to maintain that name. If the business's name is XYX, then it is necessary to write (OPC) Private Limited in the end, XYZ (OPC) Private Limited. If the firm name is denied or not accepted, you can propose another name by submitting a new SPICe+32 Form. You can proceed to the following stage as soon as the Ministry of Corporate Affairs (MCA) approves the proposed name.
Step 3: Submitting Essential Documents:
After the name gets approved, you must prepare the following documents to submit to the Registrar of Companies:
- Submit MOA, or Memorandum of Association, which outlines the goals the prospective firm or company would pursue.
- Submit AOA (articles of association), which outlines the bylaws the firm will run under
- Since there is only one member or director, a nominee must be appointed on their behalf because, if the member or director is injured or passes away and is unable to perform their duties, the nominee will act in the director's place and complete all of their duties. Their PAN and Aadhar cards will also be used as proof of their permission in Form INC-3.
- Forms DIR-2 and INC-9 must be approved, and the proposed Director's declaration must be made, respectively.
- Include ownership documentation, a letter from the owner stating that they have no objections and verification of the proposed company's registered address or place of business.
- Submit a declaration from the expert attesting to the completion of all compliances.
Step 4: Filing of Forms with MCA:
With the Digital Signature Certificates of an expert and the director, attach all documents with the SPICe+ Form, SPICe-AOA, and SPICe-MOA before being uploaded to the MCA's official website for approval. For obtaining TAN and PAN numbers, you do not require separate applications.
Step 5: Issuance of the Registration Certificate
After verifying all the paperwork and documentation, you can incorporate a firm after the ROC (Registrar of Companies) issues a Registration Certificate.
What is a Sole Proprietorship?
The simplest type of business for individuals to operate is a sole proprietorship in India. Like a partnership or a private limited company, it is not a legal entity. Both the proprietor and the proprietorship firm are regarded as one legal entity. Starting a sole proprietorship in India is inexpensive. The benefit is that attending board meetings and yearly meetings is optional.
Process of Proprietorship Company Registration
You need to follow the following steps for a proprietorship firm registration in India:
Step 1: Documentation
The documentation of the owner and the primary location where the proprietorship firm will conduct its business activities is the first step in the sole proprietorship firm registration process. You must ensure the documents are current and authentic.
Step 2: Choose an Original Name
Choosing a unique name for your proprietorship is the first step in proprietorship firm registration. The name must be legal and may not violate any registered trademark's intellectual property rights. You can start the procedure by checking whether the proposed names are available in the trademark public database on the IP India portal. Register the name you choose for your proprietorship business as a trademark after you do so to guard against potential infringement or misuse.
Step 3 – MSME / Udyog Aadhar / Udyam Registration
You require two mandatory documents in the name of your proprietorship firm to open a business bank account. The MSME or Udyam Registration Certificate is the second, and the Udyog Aadhar card is the first. In addition to the benefits provided under the MSME Act, these documents allow an entrepreneur to access online MSME services and perks given by several Government Departments.
Step 4: GST Registration
Without GST registration, your sole proprietorship business is not permitted to provide products or services across India. However, if your company's operations are limited to a single state, GST registration is only necessary once the revenue reaches Rs. 40 lakh for commodities and Rs. 20 lakh for services, respectively.
Step 5: Other Tax Registrations
A proprietorship firm may be necessary to get TAN, IEC, and PT Registrations depending on the business activity's nature and the business's prime location. TDS laws must be complied with by TAN, while firms engaged in the import and export of products or services must adhere to the IEC Code. In several states where professionals must pay professional tax, proprietorships are obliged to register for PT.
Documents Required for Sole Proprietorship Company Registration
- Two coloured pictures
- Aadhar Card, PAN Card, Cancelled Cheque
- Address Proof (Driver's License, Passport, Voter ID, Bank Statement, or Electricity Bill, all no older than two months)
Sole Proprietorship V/S One-person company
Registration
- The registration of the business is optional under a proprietorship. If an owner wants to register his business, he can do so.
- Under the 2013 MCA and Companies Act, a one-person company may be registered.
An entity's legal status
- A sole proprietorship is not regarded as a different legal entity
- A one-person company is a distinct legal person.
Liability of Members
- A proprietor's liability is unlimited.
- Liability in a one-person company is limited to the amount of share capital.
The minimum and maximum number of members
- There is a minimum/maximum of just one proprietor in a proprietorship.
- In the case of One-person company minimum of one person and a maximum of 2 members.
Foreign Possession
- Proprietorships are not permitted to have foreign ownership.
- Foreign ownership is permitted in a one-person company if one person is the director and the other is the nominee. The nominee and the director cannot both be foreign nationals.
Transferability
- Transferability is not permitted under a proprietorship.
- Transferability is only permitted to 1 person in a one-person company.
Continuity
- A proprietorship ends with the member's death or retirement.
- Existence in a one-person company is independent of the directors or nominees.
The Taxing
- Owner-operated businesses are taxed individually.
- The tax rate for a one-person business is 30% of profits.
Yearly reports
- Proprietorship tax returns for income filed with the business's registrar
- One person company filed with the company's registrar.
Conclusion
One-person companies and sole proprietorships are significantly dissimilar from one another. In contrast to one-person company registration, a proprietorship firm is not a distinct legal entity. In addition, a proprietorship ends with the retirement or death of the member, whereas a one-person company's existence remains unaffected by directors or nominees.
