Q: How does sole proprietorship differ from one person company?

Ans: In simple words, it is one man business organization. All the assets of the business and profit generated out of business are owned by sole proprietor. The sole proprietorship is achieved under Shops and Establishments act , 1958 in Madhya Pradesh.

The advantage of sole proprietorship is complete control and freedom to make quick decisions regarding the business. There is no sharing of profits.

A significant disadvantage is unlimited liability. He can have access to limited capital. A single person can not be expert in every sector of business.  This leads to limited managerial liability.

Section 2(62) of the Companies Act, 2013 defines a 'One Person Company' as a company which has only one person as a member. Simplifying thereof, a 'One Person Company' can be formed by only one member and one director. Importantly, the member and director can be the same person.


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