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  7. Difference Between AOP and BOI: Key Comparisons

Difference Between AOP & BOI

Updated on: 27 Dec, 2024 11:47 AM

Two terms that often create confusion are Association of Persons (AOP) and Body of Individuals (BOI). While they may sound alike, they represent distinct entities with unique characteristics and implications.

An Association of Persons (AOP) refers to a group of individuals or entities—whether natural or artificial—who unite with a common objective, driven by aligned mindsets. In contrast, a Body of Individuals (BOI) strictly comprises natural persons who come together primarily to generate income.

Contents

What is Association of Persons (AOP)?

An Association of Persons (AOP) is a group of two or more individuals and an artificial person, which could be an LLP or a company, regardless of whether incorporated or not, join their hands for a common purpose of generating income. Forming an AOP does not require a formal contract.

Examples of AOPs:

  • Partnerships: A common type of AOP where individuals join forces to establish a business, sharing profits, losses, and liabilities. Each partner is personally accountable for the partnership's obligations.
  • Joint Ventures: Temporary collaborations between individuals or entities to achieve specific business goals.
  • Cooperative Societies: Groups of individuals pooling resources to meet common economic, social, or cultural needs.

What is Body of Individuals (BOI)?

A Body of Individuals (BOI) refers to a group of two or more individuals who come together for a shared purpose. Unlike an Association of Persons (AOP), a BOI is typically not formed with the primary intention of earning profits. Instead, its members collectively own, manage, or oversee a property or asset, with any income generated being distributed among them.

Examples of BOIs include:

  • Clubs: Members unite to access shared facilities, such as sports or recreational amenities, with any income generated being used for maintenance.
  • Housing Societies: Members collectively own the land and buildings, sharing the costs, responsibilities, and benefits arising from them.

Differences between AOP and BOI

The fundamental differences between an Association of Persons (AOP) and a Body of Individuals (BOI) lie in their purpose and the nature of their activities. Here is the table summarizing all the differences between the Association of Persons (AOP) and the Body of Individuals (BOI):

Feature Association of Persons (AOP) Body of Individuals (BOI)
Definition A group of individuals coming together for a common objective. A group of individuals joining a company to earn revenue or income.
Composition Includes both natural persons and companies. Only includes natural persons (individuals).
Purpose Can have any purpose, not necessarily income generation. Primarily focused on earning income.
Taxation Profits are taxed at the rate applicable to individual members. Income is taxed as an association of persons, often at a higher rate than individual rates.
Formation A formal agreement or contract is not required. A formal agreement or contract is usually required.
Profit Sharing Profits can be distributed in any proportion agreed upon by members. Income is typically shared equally among members unless otherwise specified.
Examples Sports clubs, social clubs, religious organizations. Partnerships, joint ventures, investment clubs.

Frequently Asked Questions

Q- How do AOP and BOI differ in terms of membership?

The key difference lies in the composition of their members. An AOP can include both individuals and artificial entities, whereas a BOI is limited to natural persons only.

Q- What are the tax implications for AOP and BOI?

The tax treatment for AOP and BOI can vary. The income of an AOP or BOI is taxed at the maximum marginal rate unless the individual shares of the members are determinate and known. In such cases, the income is taxed in the hands of the members.

Q- Can a company be a member of a BOI?

No, a company cannot be a member of a BOI. A BOI can only consist of natural persons.

Q- What are some examples of AOP and BOI?

An example of an AOP could be two companies forming a joint venture for a specific project. An example of a BOI could be a group of individuals coming together to invest in a property.

Q- How is the income of an AOP or BOI assessed?

The income of an AOP or BOI is assessed based on the total income earned by the association or body. If the shares of the members are determinate, the income is taxed in the hands of the members. If the shares are indeterminate, the income is taxed at the maximum marginal rate.

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CA Abhishek Soni

CA Abhishek Soni
CEO at Tax2win

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Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.