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A Sole Proprietorship can become a One Person Company (OPC) at any time. Issues like owner liability, firm closure in the event of the owner's death, and so on require the Proprietor to convert the business into an OPC. When a corporation is converted to OPC, it protects the company's assets by limiting the owner's responsibility to the amount of their share. An OPC is a legal structure in which the owner and the business are two independent entities with a nominee acting as a perpetual succession.
A One Person Company is founded by just one person. A Sole Proprietorship, on the other hand, is owned and run by a single person. In a Proprietorship business, the entire operation is reliant on the sole proprietor, who must bear all responsibility and risk on their own.
Legal entity: An OPC is a legal entity but a Sole Proprietorship is not.
Liability: The owner's unconstrained liability is a burden of running a Sole Proprietorship firm while a One Person Company is a separate legal entity with perpetual succession and limited liability.
Owner: In an OPC, the owner and the business are two separate entities while in a Sole Proprietorship, the owner and the business are a single entity.
Nominee: A nominee exists in an OPC but not in a single proprietorship. In the event of the owner's death, an OPC is transferred to the nominee, but a single proprietorship firm shuts in case of the owner's death.
Registration: There is no need to register a Sole Proprietorship company. However, a One Person Company can be registered under MCA and Companies Act, 2013
Legal procedures: There are no legal procedures or paperwork involved in forming a Sole Proprietorship firm. On the other hand, the formation of a One Person Company involves documentation.
Tax: An OPC is taxed under the Income Tax Act for private companies. The tax of a Proprietorship is on his income tax.
Advantages of converting Proprietorship to One Person Company
A Proprietorship that converts to a One Person Company receives several benefits. They are:
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