Sole Proprietorship Registration

At times, it happens that you are tired of working under people and want to set up your business. Setting up a Sole Proprietorship Firm saves you from this situation and that also when the prices are so low.

  • Discussion about your business model
  • Proprietorship Name Reservation
  • MSME & GST Registration
  • Application submission
  • Registration certificate in 7-15 days

Start Your Application

Recognized as a single person firm, a sole proprietorship is one of the easiest business structure proposed in India. Here is all you need to know about Sole Proprietorship Business.

What is a Sole Proprietorship Registration?

A sole proprietorship is a convenient and simplified way to commence a business in India. It is neither considered as a corporation or a company and the business is owned by a single person who is the owner/director/shareholder of the proposed entity.

An individual who wishes to sell his/her own products or services can run their business as a sole proprietor and can enjoy the rights provided to a registered legal company. Most of the entrepreneurs find it as an ideal business entity and have registered their business under it. The loss or profit of the company is considered as the loss or profit of the individual and the income of the company is showed as the income of the owner as per the Income Tax Act.

Registering a sole proprietorship business is totally an online digital process that can be accompanied with the help of an expert. However, a person interested in registering as a sole proprietorship requires fulfilling some basic requirements like open a bank account on the name of the business entity, etc. There are no as such mandatory rules for sole proprietorship registration but is highly advised to do so. Registration provides legal identity to the company ease in commencing business activities in India. An individual can select any of the below-given options for the registration:

  • SME registration
  • Registration under Shop and Establishment Act as per the regulations of the respective state.
  • GST registration.

What are the Features of a Sole Proprietorship?

Every business structure has its own features. Here are some specific features of a Sole Proprietorship Business:

  • Individual’s Investment:

    To start a sole proprietorship business an individual who is denoted as the sole proprietor can only invest his personal assets or resources or can borrow it to commence the business activities.

  • Ownership:

    A single person has the hold and is the owner of the firm. Further, he can transfer the ownership through a will or last testament as per his wish.

  • No profit or loss sharing:

    All the income generated by the company or the loss or debt incurred by the company belongs to the owner and he cannot share it with someone else.

  • Unlimited Liabilities:

    It can be a feature as well as one of the biggest disadvantages that the assets and personal resources of the owner are not protected and can be used to incur the debt and losses of the company.

  • Fewer formalities:

    With the ease of commencement, sole proprietorship comes with few formalities before and after registration.

  • Control Power:

    Control power in the hands of a single person and he is not answerable to anyone else. He has to use his skills, expertise, and intelligence to carry on business activities of the entity.

Why one should choose a Sole Proprietorship firm?

A sole proprietor is one of the best choices for entrepreneurs who wish to handle everything on their own. Despite of it, it has various benefits given as follows:

  • Provides flexibility in carrying out business activities.
  • One of the oldest and easiest forms of business structures
  • Single hand control
  • Easy to start and close
  • Hazel free business structures with very few compliances
  • Self- Accountability
  • Being your boss means you don’t have to answer to any shareholder/director
  • Decision-making power
  • Don’t have to share your income and profits with anyone.
  • No disputes between the members
  • Some common examples of proprietorship business is shops such as chemist, saloons, grocery, etc.

Difference between Sole Proprietorship and One Person Company (OPC)

Both of the entities can carry on their business activities with just one person as an owner or shareholder or director. Still, there are various points of differences between them that are given as follows:

Point of Difference

Sole Proprietorship

One Person Company (OPC)

Limited Liabilities

Sole proprietorship is deprived of the limited liabilities of the members. Under which in case of debt or loss the assets of the company as well as the owner would be used to incur the losses.

One Person Company enjoys the benefit of limited liability under which assets of the shareholder/ director/ owner remains protected.

Tax Liabilities

In Sole Proprietorship the income of the entity is considered as the income of the owner and the owner is taxed as per his income. 

OPC is taxed as a Pvt Limited Company and there are no separate tax brackets for it.

Conversion into other business entities

A sole proprietorship does not require converting into any public or private limited company and can carry on its business activities a single person entity no matter what its revenues are.

OPC have to be converted into a private limited or a public limited Company. Once it has crossed the turnover limit of Rs 2 crores for 3 years or Rs 50 lakhs as a share paid-up capital income.

Perpetual Succession

In sole proprietorship ownership can be granted to some other person through will and last testament that can or cannot be challenged in the court.

 

OPC can enjoy the rights of perpetual succession through the nominee

Compliances

Sole Proprietorship has to get its account audited as per the provisions of Income tax Act only in the case when company crosses its threshold limit

On the other hand OPC has to fulfill all the compliances followed by a private limited company such as filling of annual returns and account audits, etc.

 

Company Registration

It is not so compulsory but is beneficial

Has to be registered as per the provisions of Companies Act, 2013 under the Ministry of Corporate Affairs

Foreign ownership

Cannot have foreign ownership

Allowed if one of the nominees of director is a foreign national. But both cannot be foreign nationals.

Members

Minimum: sole proprietorship

Maximum: 1 person

Minimum: 1 person

Maximum: 2 person

How to Register a Sole Proprietorship Firm?

You can register your sole proprietorship firm in a simplified manner with little bit expert guidance. Following are the documents and procedure for the registration of the sole proprietorship firm:

Procedure for Proprietorship registration

  • Step 1:

    Apply for PAN

  • Step 2:

    Select an appropriate name for the proposed business entity

  • Step 3:

    open a bank account for the proposed business entity (not mandatory yet beneficial)

  • Step 4:

    register as Small and Medium Enterprise or SME (not mandatory yet beneficial)

  • Step 5:

    obtain Shop and establishment License

  • Step 6:

    GST Registration

Documents Required for Sole Proprietorship Registration

Here is the list of documents you would require for Proprietorship business registration:

1. Aadhar of the Proprietor:

The proprietor of the proposed firm has to submit a scanned copy of his Aadhar card. Aadhar card is a necessity in India. a person cannot file his Income-tax returns unless his PAN card is linked with his Aadhar card number. In case you don’t have an Aadhar card or its information does not match with PAN card, get it corrected before the submission.

2. PAN card of the Proprietor:

In addition to Aadhar card, PAN card is also a mandatory document for proprietorship business registration. An individual cannot file his returns unless he has a PAN card. PAN card is issued by the Income-tax department t of India which contains a unique PAN card number. All the other details mentioned in other required proof should match with the PAN card.

3. Current Bank Account Details:

If the proprietor has his PAN and Aadhar card he can open a bank account at the name of his company. In addition to these documents, he would require identity and address proof. Documents regarding GST registration are also required to open a current bank account.

4. Office Proof:

A proprietor can carry out his business activities at any owned or rented place. He has to provide proof of his registered office that can be any of the following:

  • a. In case of owned property: any utility bill such as electricity bill, gas bill, water bill, etc along with the NOC. The bill should not be old than two months
  • b. In case of Rented property: lease/ rent agreement along with the NOC from the landlord.

Additionally, few registrations given as follows are required for the registration purpose of the proposed firm:

SME Registration

Individual requires registering as an SME (small and medium enterprise) as per the provisions of the MSME Act. For it, you have to submit an online application. However, it is not compulsory but is beneficial for the company especially at the times of loan requirements at low-interest rates. The government has launched various schemes for the betterment of SMEs registered under MSME act.

Shop and Establishment Registration

Individual must have shop and establishment license as per the local laws. It is issued by the municipal parties based on the number of workers/ employees in the firm.

Registration under GST

GST registration is mandatory to carry business activities in India. Even if you are doing online business you would require a GST number. GST registration can be done in 5 working days with the following documents:

  • a. PAN Card of the proprietor
  • b. Aadhar Card of the proprietor
  • c. Passport size photograph of the proprietor
  • d. Office proof
  • e. Bank Statement copy that contains bank account number, IFSC code, and address

Post Compliances

  • 1. One has to file annual Income Tax Returns on time.
  • 2. One has to file his GST in case they have GST registration
  • 3. If liable for TAX audits, the individual should deduct TDS (tax deducted at source) from employees income and file TDS returns

Frequently Asked Questions

Any citizen of India can start a sole proprietorship. All you need is a current bank account which should be on the name of your business. Registrations requirement depends on what kind of a business you want to start up.

Testimonial

Related Articles

Our Partners

Forbes 30
KU
Stripe
DHFL
Bank of Maharashtra
Food Panda