The concept of One Person Company took birth with the transformation of the initial Companies Act in the year 2013. It is with this legislation that One Person Company was introduced as a novel concept. A One Person Company is a form of Private Company in itself with the only difference being in the number of minimum members required. Generally, in case of a Private Company, the minimum number of members is two whereas in One Person Company, it is one. This is an exception to the general rule.

The introduction of One Person Company came in order to limit the Sole Proprietorships. A proprietorship is not a separate legal entity whereas one person company registration is a separate legal entity.[1] With a sole proprietorship, the owner and the enterprise are recognized as one entity. This causes another issue wherein the liability of the owner becomes unlimited. A sole proprietorship’s liability is unlimited that is, all the assets of the individual will be attached and there is no limitation on the liability. Liability extends to his personal belongings as well.[2] However, in case of a one person company, the liability remains limited as the company gets identified as a separate legal entity than its owner and hence, the personal belongings of the owner are not included. This is one instance where the identity of a one person company as a separate legal entity gets celebrated.

Another point of difference is that of a nominee. A one person company must have a nominee who will look after the company upon the death of the sole proprietor, but there is no such requirement in the case of a sole proprietorship.[3] This acts as another benefit of one person company over sole proprietorship as a proprietorship is to come to an end the on death or retirement of the member whereas One Person Company’s Existence is independent of directors or nominee.

A one person company stand out to be more beneficial than a sole proprietorship in many ways out of which one is brand value. A one person company gets registered with the Registrar of Companies and with the Certificate of Incorporation, it automatically develops a brand for itself. A sole proprietorship lacks registration and without a separate legal identity, it does not stand out to be a brand.