ProprietorshiP REGISTRATION
A sole proprietorship form of business is a common business structure in India. A sole proprietorship business is established and managed by a single person. This type of business form is best suitable for individuals wishing to start a business with less investment. Generally, it does not require any registration as such.
Sole Proprietorship registration in India is for one owner business. Sole proprietor manage business profits and income tax under their own name or a trade name. It's a common choice for small businesses and individual entrepreneurs. This type of business can be incorporated in fifteen days and hence makes it one of the most popular types of business to begin in the unsystematic sector, specifically among merchants and small traders. For a Sole Proprietorship business, registration is not required as it is identified through alternate registrations, such as GST registrations. However, its liability is unlimited and it also doesn’t have perpetual existence. Many local businesses such as grocery stores, parlours, boutiques, retail stores, etc., can be established as a sole proprietorship firm. Even small traders and manufacturers can establish a sole proprietorship firm.
The Startup Trends provides assistance and support for Proprietorship Registration in India.
A sole proprietorship form of business is a common business structure in India. A sole proprietorship business is established and managed by a single person. This type of business form is best suitable for individuals wishing to start a business with less investment. Generally, it does not require any registration as such.
Sole Proprietorship registration in India is for one owner business. Sole proprietor manage business profits and income tax under their own name or a trade name. It's a common choice for small businesses and individual entrepreneurs. This type of business can be incorporated in fifteen days and hence makes it one of the most popular types of business to begin in the unsystematic sector, specifically among merchants and small traders. For a Sole Proprietorship business, registration is not required as it is identified through alternate registrations, such as GST registrations. However, its liability is unlimited and it also doesn’t have perpetual existence. Many local businesses such as grocery stores, parlours, boutiques, retail stores, etc., can be established as a sole proprietorship firm. Even small traders and manufacturers can establish a sole proprietorship firm.
The Startup Trends provides assistance and support for Proprietorship Registration in India.
Key Features of Sole Proprietorship
-
Single Owner
- Full Control over Management
- Entitlement to 100% Profits
- Unrestricted Liability
- Limited Existence
- Operates on the Owner’s Identity
Who can opt for Sole Proprietorship?
Any person 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 10-15 days. Also, the control in the business is solely in your hands. The proprietor is completely responsible for all the assets and liabilities of the business.
Checklist Items for a Sole Proprietorship Registration
- A certificate / license issued by Municipal authorities under the Shop & Establishment Act.
- The license issued by registering authorities like the Certificate of Practice is issued by the Institute of Chartered Accountants of India, the Institute of Company Secretaries of India and the Institute of Cost Accountants of India.
- The registration / licensing document is issued in the name of the proprietary concern by the Central Government or the State Government Authority / Department etc.
- The banks may also accept the IEC code (Importer Exporter Code) issued to the proprietary concern by the office of the (Director General of Foreign Trade) DGFT as an identity document for opening of the bank account etc.
- Complete Income Tax return online (not just the acknowledgement) in the name of the sole proprietor where the firm’s income is reflected, duly authenticated and acknowledged by the Income Tax Authorities, The utility bills such as electricity, water and the landline telephone bills in the name of the proprietary concern.
- Issue of GST Registration/Certificate.
- Issue of MSME / Udyog Aadhaar Registration / Certificate.
Advantages of Proprietorship
1. Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process - as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.
2. Lower compliance: As most proprietorship are only registered with Government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.
3. Simplicity: As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.
4. Business decision: In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.
5. Complete control: As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.
Disadvantages of Sole Proprietorship
1. Funding: This type of business structure relies solely on one person’s savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible - as this type of business entity does not allow for profit sharing or shareholding.
2. Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship - the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure - the proprietor will be held personally liable until all the liabilities are extinguished.
3. Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.
4. Growth: A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.
5. Unincorporated business: Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.
Registering a Proprietorship in India
Registering a sole proprietorship in India does not involve a specific Government-established registration mechanism. Instead, the recognition of a proprietorship comes through tax registrations required by the business per relevant rules and regulations. One crucial tax registration is the GST (Goods and Services Tax) Registration, which must be obtained in the proprietor’s name to establish the operation of the business as a sole proprietorship. This registration indicates that the proprietor is conducting business under the proprietorship structure.
Eligibility Criteria for Registering a Sole Proprietorship in India
Since the Government does not consider a Sole Proprietorship as a separate legal entity, no specific criteria are provided for starting one. However, to establish a sole proprietorship, it is essential to fulfill the following requirements:
Tax-Paying Citizen: As a sole proprietor, you must be a tax-paying citizen of India. It is necessary to comply with all the applicable tax laws and fulfill your tax obligations promptly.
GST Registration: If your sole proprietorship sells goods or services beyond the threshold limits specified by the Goods and Services Tax (GST) regulations, you must register for GST. This registration is mandatory to collect and remit GST to the government.
Bank Account: Opening a dedicated bank account in the name of your sole proprietorship is crucial for financial transactions and record-keeping. It is recommended to have a separate business bank account to maintain clarity and transparency in your business finances
Documents Required for Sole Proprietorship Registration in India
For all the types of registrations which are recommended for the sole proprietorship firms, the following general documents are required for most of them. There can be some exceptions for specific types of registrations. The owners are advised to check the official website of the Government body issuing that registration to make sure to have all the documents required for the same.
To register a sole Proprietorship, the following documents are mandatory:
Aadhaar Card: Aadhaar card number is necessary for the official registration. This is important to link business along with the other details which are linked with Aadhaar card
PAN (Permanent Account Number): PAN card is needed at the time of proprietorship registration to file Income Tax Returns. Thus, it is also mandatory to get a GST registration number (if applicable).
Bank Account Number: The bank account linked with office transactions needs to be submitted. This can also be applicant’s personal account, if he/she do not have a separate bank account for business
Registered Office Proof: The certified office proof is needed for any registration mentioned above. Registered office proof is discussed in detail above
Compliance Requirements for a Sole Proprietorship
Compliance requirements for a sole proprietorship firm include the following:
Income Tax Return Filing: The proprietor must file a personal income tax return using the appropriate form, such as ITR-3 or ITR-4, which allows for the declaration of business income.
GST Return Filing: Regular filing of GST returns is mandatory if the proprietorship is registered for Goods and Services Tax (GST). The filing frequency depends on the registration plan, which can be monthly or quarterly.
TDS Returns: If the sole proprietorship has employees or makes significant payments for goods and services, the tax must be withheld at source (TDS) as per the applicable rates. Quarterly filing of TDS returns is required to report the details of tax deducted.
Registration of Sole Proprietorship
The procedure for incorporating a sole proprietorship firm is-
Step 1- Applying for PAN card.
Step 2- After obtaining a PAN card, or if the proprietor already has a PAN card, the next step is to keep a name for the sole proprietorship business.
Step 3- The next step is to open a bank account in the name of the business. All the transactions of the business will be through this bank account.
Step 4- Though no specific registration is required for starting a sole proprietorship firm, certain basic registrations are required to be obtained by a sole proprietorship firm for doing business. The basic registrations required by a sole proprietorship are-
Step 5- The proprietor needs to obtain the Registration Certificate under the Shops and Establishment Act of the state in which the business is located.
Step 6- The sole proprietorship should also register for GST if the business turnover exceeds Rs.20 lakh.
Step 7- The sole proprietorship can also register as a Micro, Small and Medium Enterprise (MSME) under MSME Act, though it is not mandatory, it is beneficial to be registered under the same.
Timelines for Sole Proprietorship Registration
A sole proprietorship can normally be registered in India through The Startup Trends in less than 15 days. However, the timelines for registration will vary from case to case depending on the government and bank processing timelines.
Why Choose The Startup Trends for Registration of Proprietorship?
Access To Experts- We provide access to reliable professionals and coordinate with them to fulfil all your legal requirements. You can also track the progress on our online chat platform, at all times.
Realistic Expectations- By handling all the paperwork, we ensure a seamless interactive process with the Government. We provide clarity on the incorporation process to set realistic expectations.
Strong Team- With a team of experienced business advisors and legal professionals, you are just a phone call away from the best in legal services.