The corporate laws in India got revolutionized by The Companies Act, 2013, introducing various new concepts that were non-existent previously. The introduction of the concept of One Person Company was one of the game-changers. A whole new way of starting businesses was recognized, which granted flexibility that an entity like a company could offer. It also protected limited liability that was lacking in partnerships and sole proprietorships.
The ability of individuals to form a company was already identified by various other countries like the USA, China, Singapore, UK and Australia before the new Companies Act 2013 was enacted.
A One-person Company is a company that has only one person as to its member according to Subsection 62 of Section 2 of the Companies Act, 2013. Because members of a company are recognized as the company’s shareholders or the subscribers to its Memorandum of Association, One Person Company (OPC) is functionally a company with only one shareholder as its member.
OPCs are usually formed when the business has just one founder or promoter. Due to the many advantages that OPCs offer, entrepreneurs whose companies are at a nascent stage prefer the creation of OPCs rather than sole proprietorships.
An OPC and a sole proprietorship form of business might come across to be alike since both forms of companies have a single person involved who owns the industry, but in reality, they are quite different from each other. The nature of the liabilities carried by both of them is the significant difference between the two forms.
OPC being a separate legal entity on its own, which is distinctive from its promoter, has its liabilities and assets. The promoter cannot be held liable personally to pay off the company's debts.
Whereas the sole proprietorship and its proprietor is the same. So, in the case of non-fulfilment of the business's liabilities, the promoter’s assets are attached and sold by the law.
Created & Posted by (Ramesh Kumar Gupta)
Senior Accounts Manager at TAXAJ
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