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When the need arises, a Partnership firm might change to a One Person Company (OPC). Due to issues such as owner's liability, legal status, registration, and credibility, the Partnership might convert the business into an OPC. When a Partnership is changed to an OPC, the company's assets are protected because the owner's responsibility is limited to the value of their share. Partnerships that turn to an OPC also gain legal status because an OPC is a legal framework.
A One Person Company (OPC) is formed by a single individual. The Companies Act of 2013 governs and regulates OPCs. A partnership, on the other hand, is formed by a formal agreement between two or more parties to jointly manage and operate a business. A Partnership is a business arrangement in which two or more persons share earnings and losses. The Indian Partnership Act of 1932 governs and regulates Partnership firms.
Partnership vs. One Person Company
Legal entity: An OPC is a separate legal entity where the owner and the business are two distinct entities. In a Partnership, on the other hand, there is no concept of a separate legal entity. The Partnership and all of its participants are recognized as a single entity.
Liability: In a Partnership, the partners are personally accountable for any losses incurred by the firm. Partners have the drawback of unlimited liability, which means that the liability may extend to the partners' assets. An OPC, on the other hand, is a separate legal entity with limited liability. The sole owner has limited liability up to the amount of the share capital or the value of the company's shares in OPC.
Owner: In an OPC, the owner and the business are two distinct entities, whereas, in a Partnership, the owner and the business are the same.
Registration: A Partnership firm does not need to be registered. A One Person Company, on the other hand, must be registered under the MCA and Companies Act, 2013.
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