A sole proprietorship is a kind of enterprise in which business is owned & managed by an individual. There is no legal difference between the owner and the business is a sole proprietorship business. To put it in another way a sole proprietorship is not a legal entity. An owner is responsible for clearing off the debts of the business. The sole proprietorship is a preferred & popular business form in India; simple and easy to form at a nominal cost. A sole proprietorship is a conducive and simplified way to commence a business in India. It is neither considered as a corporation nor a company and the business are owned by a single person who is the owner/director/shareholder of the proposed entity.
When single person runs a business then such kind of business is called as proprietary business, and the owner of the business is called as proprietor. Proprietorship is the most common form of the business which is used in India. You can start and operate the business with minimum regulatory compliance. However, there is no full-fledged way available to register your proprietorship by Indian Government. Tax registration and other business registration’s is the right way to show existence of your proprietary business.
Frequently Asked Questions
Following registrations can be used to show the existence of your proprietor Business.
- Professional Tax Registration.
- GST Registration.
- Shop and Establishment Registration.
A sole proprietorship is an unregistered business entity type which is owned, managed, & controlled by one person. A sole proprietorship is the most common type of business in India and it is used by most micro and small businesses operating in the unorganised sectors.
Any individual who wants to start a business with less investment can opt for this type of business form. It can be started in a time span of 3-4 days. Also, the control in the business is solely in your hands.
There is no such specific legal registration mention under any law to set up a Sole Proprietorship. But an individual can apply for a few registrations to avoid any complicated scenario.
These are some of the registrations that may be opted by the Sole Proprietor:
- Registration under the Shop and Establishment Act
- Registration under the UDYAM (Micro, Small and Medium Enterprises Development).
- Registration under GST (Goods and Service Tax)
- Trademark Registration
To start a sole proprietorship firm, a person who acts as a sole proprietor can invest his personal assets, other financial resources or can borrow money to commence the business activity.
A single person has grip on the entire business and is the owner of the firm. Owner can transfer the ownership through a will or last testament to anyone he wants.
No Profit or Loss Sharing
All the income generated, or the loss or debt incurred by the company belongs to the owner, and he/she cannot share it with someone else.
This feature sometimes acts as a flaw. Since business and the owner are no separate identity, personal property of the owner can be used to pay the debts of the business.
With the easy commencement, sole proprietorship comes with a few formalities before & after registration.
Control power is in the hands of a single person, and he/she is not answerable to anyone else. The person should be capable of using his skills, expertise, and intelligence to carry on business activities. The control over the business can not share with anyone unless the business is transfer to anyone.
To register a sole Proprietorship, documents are required which are:
- Aadhar card or any identity proof
- PAN card
- Business account- Current account (Post formation)
- Address Proof - Rent Agreement, Electricity Bill
Quick Decision Making
The owner has the Control over all business decisions which ensures quicker business decision making and hence, faster execution.
Easy to Start
The registration process for starting a sole proprietorship firm is very easy unlike other business structures. One can get Registration Certificate within 1 working day. Obtaining a GST registration is also very quick and easy.
Easy to close
The dissolution of the Proprietorship firm is very easy because there is no legal distinction between the proprietor and the proprietorship firm, not much regulatory formalities are required for closing of a proprietorship.
In the proprietorship business, the owner does not require to file a separate business tax report. The business will be taxed at the rates applied to personal income, and not corporate tax rates. This means huge tax savings.
The owner of Proprietorship firm, himself is self-employed and this creates various employment opportunities.
A Sole Proprietorship is inexpensive as compared to all other forms of organizations. Also, on account of the minimum compliance requirements, it is inexpensive even in long run. There are minimal compliance filings and many concessions in various laws.
The Proprietorship Registration process is completely online though CA Mantra, so you do not even have to leave your home to get your entity registered.
We will assist you in these ways: -
- Getting PAN
- Guiding you to choose a well-suited name
- Helping you to getting GST Registration
4 Steps to Register Proprietorship firm
You need to apply for obtaining the Permanent Account Number or PAN from the government to be able to run your business if you have not taken it till now in your name. In case you have PAN number then this step can be skipped.
You should always opt for a name for your entity which clearly defines the purpose of your business and is unique. Also, you need to pay attention that the name you are choosing is not in use by any other business, if possible.
Then you need to open a current bank account in the name of your entity. However, as there is no requirement for formal registration, you can go for other government licenses as per the legal requirements of your business.
Although it is not necessary, you can go for MSME Registration (now UDYAM) or SME Registration under the Micro, Small and Medium Enterprises Development Act, 2006. Getting registered under the MSMED Act can help you take benefits from the government schemes for such enterprises. You can also get GST Registration if the turnover of your business exceeds the limit for the same in your respective state.
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