One person company provides the wide range of benefits of sole proprietorship and private company whereas partnership, the traditional form of business entity enjoys the requirement of less compliances. Therefore, it is important to know the pros and cons of the business entity before selecting the venture.
OPC is an improved form of Sole Proprietorship which gives the advantage of limited liability to the sole owner of the company. This new concept sparks the business world with its invaluable advantages. One Person company is required to be registered with the MCA (Ministry of Corporate Affairs) under the Companies Act, 2013.
Partnership is a traditional form of business entity whose registration is optional. In case of registration it’s done under the Partnership Act, 1932. In this type of business entity minimum two persons share the profit and loss as per the terms of the partnership agreement.
Below table shows the comparison of two ideal entities for most entrepreneurs:
Particulars
One Person Company
Partnership
Governing Body
One Person Company governed by the Companies Act, 2013.
Partnership governed by the Indian Partnership Act, 1932.
Registration
Registration of OPC is compulsory with the MCA (Ministry of Corporate Affairs) as per the provisions of Companies act.
Partnership may or may not be registered, its optional to get registered the partnership.
Name Approval
The name of the OPC needs to get approval from the MCA and ‘OPC’ word should be mention with the name of the company.
There is no requirement to take any prior name approval from the registrar in case of a partnership.
Legal Separate Entity
One Person Company has a separate legal entity from its member. Therefore, member’s personal assets are not liable for the loss incurred by the business.
Partnership and all its partners considered as a single entity. Therefore, partners are responsible for the liabilities related to the partnership.
Liability
The sole owner enjoys the limited liability to the extent of the value of shares in the company.
In partnership, partners suffer with the unlimited liability which means liability extend to the personal assets of the partners.
Number of members
Only one member is required to form OPC who has to be a resident of India.
Minimum-2 members
Maximum- 20 members
Common seal
In OPC two rubber stamps are required to prepare one with the name of company and other with the designated person.
In partnership, there is no compliance of common seal.
DIN (Director Identification Number)
In OPC, every director is required to obtain DIN.
No partner is required to get DIN.
DSC (Digital Signature Certificate)
For filing the e-forms online with MCA, the sole owner required to obtain digital signature.
In partnership, there is no requirement to obtain digital signature by any designated partner.
Auditing
Statutory Auditing is compulsory within the prescribed time as per provisions.
Except tax auditing, there are no provisions regarding accounts auditing.
Annual Filing
Filing of financial statements and annual return is compulsory in OPC.
Not required to file an annual return in partnership.
Admission of minor
In OPC minors cannot be appointed as director/ nominee/ sole shareholder.
In case of partnership minors can be admitted for the benefit of the firm.
Tax on profit
In OPC, dividend distribution tax has to be paid on the dividend.
No need to pay any tax on the profit distributed among the partners.