Proprietorship businesses are those businesses which are mostly started by only one person. In such entities everything is in the hands of just one person. In India mainly there are two types of proprietorship: Sole Proprietorship Firms and One Person Company. Both are very different from each other. OPCs are the corporate bodies having all the benefits like a private limited companies on the other hand sole proprietorships are not like that. Sole proprietorship firm registration and One Person Company registration are very different from each other also they are suitable for different forms of businesses. In the current blog will discuss both these types of proprietorship entities. If you are new in the business world you must be aware about these two forms of business registrations.
Different Types of Proprietorship Firms in India
Mainly there are two types of proprietorship in India which are discussed below in detail:
Sole Proprietorship Firms
Any business established by one person without the benefits of perpetual succession, independent legal entity status, limited liability, or juristic person status is referred to as a sole proprietorship firm. These businesses are the greatest little ones there are. It has been stated that this is because these businesses don’t follow the same stringent standards as corporate bodies. These are low-cost entities with a very low rate of compliance. The owner, who manages these businesses alone, is not burdened in any way by them. Such Entities are further divided into two subcategories which are mentioned below:
- Registered Sole Proprietor firms, which got registered through any of the above three methods. For the registration of such entities there is no separate portal like registration of corporate bodies. Such entities do not even have separate laws for their governance like corporate bodies. They are governed by the local laws
- Non registered Sole Proprietorship Firms, are the second category. As registration of these firms is not compulsory they can run even without registration. Such firms which are running without registration are called non registered sole proprietorship firms
If we talk about the registration process of the sole proprietorship firms it’s very easy and can be completed in many ways. It means although there is no separate procedure for the sole proprietorship firm registration, it can be register in many ways some of them are mentioned below:
- With the help of the GST registration such entities can be registered
- Second form of registration of such entities can be Shop and Establishment Certification
- They can also be registered as MSME with the help of the Udyog registration
One Person Companies
Out of two types of proprietorship firms, the second one is One Person Company which are popularly known as OPCs. These entities are also registered on the name of one director that is why they came under the category of proprietorship. This concept of one person company came into existence through the 2013’s Companies Act. Before that there is no such concept under the Indian laws. These entities are having all the advantages of the corporate bodies like perpetual succession, compliances, registration process, limited liability etc. these firms are more organized and up to date. They are having transparency which increases their reliability as well as credibility in the market.
Difference Between Sole Proprietorship Firm and One Person Company
Although both sole proprietorship firm as well as one person company are the types of proprietorship, there are many difference between them which are discussed below:
| Sole Proprietorship Firm | One Person Company |
| They are run by one person only | Although they are registered on the name of one person there is nominee director as well |
| Registration of such firms are not mandatory | Registration of such companies are mandatory |
| They can run without registration | They cannot run without registration |
| They can be recognized even without registration | They cannot recognized without registration |
| The person runs such entities is known as proprietor | The person run OPCs are called director |
| They are not having separate legal liability due to which proprietor is solely liable on behalf of the firm | Here the concept of limited liability is there due to which directions are not solely liable |
| There reliability and credibility is comparatively less | There reliability and credibility is high in the market |
| Difficult to build trust among the customers | They can build trust among the customers easily |
| They are not transparent | They are transparent |
| Management and operations are not very smooth | Management and operations are very smooth |
| Does not have complicated compliances | They have compliances which needs to be done timely |
| They do not have any governing law, hence govern by the general laws | They are having special governing law known as Companies Act of 2013 |
Conclusion
As mentioned above there are two types of proprietorship: Sole Proprietorship Firms and One Person Companies (OPCs). Sole Proprietorship Firms, run by a single person, can be registered through methods like GST, Shop and Establishment Certification, or MSME registration. They are divided into registered and non-registered entities, with registration being optional. On the other hand, OPCs, introduced under the 2013 Companies Act, have a mandatory registration process and offer advantages like limited liability, transparency, and credibility. While Sole Proprietorship Firms lack a separate legal identity and have lower reliability, OPCs function as more organized entities, making them suitable for businesses looking for enhanced credibility and compliance. The choice between these types of proprietorship depends on the individual needs and preferences of entrepreneurs.
