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One person co. or proprietorship firm

Mohan Verma (Assistant Manager - Finance & Accounts) (4328 Points)

12 March 2015

PLEASE TELL ME WHICH ONE IS MORE BENEFICIAL AND EASY TO OPERATE....

ONE PERSON CO. OR PROPRIETORSHIP FIRM

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Limited Liability
In a one person company the liability of the single shareholder will be limited to the unpaid subscriptttion money in his name. whereas there is no such limitation in the case of a Proprietorship.

Automatic Succession
In an OPC, there is a designated individual who shall, in the event of the death of the subscriber become the member of the company and be responsible for the running of the company.
In the case of a proprietorship this can happen only through a will, which again may be subject to challenge in a court of law.

Tax Implications
OPC’s tax rate is 30% plus surcharge, MAT etc. Further, provisions of dividend distribution tax would also be applicable on the company.

A proprietorship on the other hand is taxed at rates applicable on individuals and there is no tax on withdrawal of profits from the business. Making proprietorships is more lucrative from a tax perspective, as compared to one person companies.

Trust factor
One would expect an OPC to inspire more trust in lenders
given the incorporation process and the automatic succession.

Compliance Costs
An OPC would have to file annual returns etc just like a
normal company and would also need to get its accounts audited in the same manner.
On the other hand a proprietorship would only need to get audited under the provisions of section 44AB of the income tax act once its turnover crosses are certain threshold.