Sole Proprietorship Registration in India

An Overview of Sole Proprietorship Registration

Sole Proprietorship Registration is one of the easiest and most charm-to-go business structures in India. In a Sole Proprietorship, there is only a single proprietor who is responsible for all the actions of the entity. The proprietor is responsible for managing all the entity's actions, making decisions, accruing profits, managing losses, and managing assets.

Compared to other business arrangements, it usually entails fewer paperwork and expenses. The owner must select a name for the company, acquire any required licenses or permissions, and register with the relevant municipal or state authorities.

In contrast to other business forms, sole proprietorships are not distinct legal entities from their owners; hence, the owner bears complete liability for all facets of the business, including debts and obligations. This structure is easy to understand and flexible.

Why is Sole Proprietorship Popular in India?

Small businesses flourish in India since they require very little capital and have low entry barriers. Due to its affordability and ease of use, sole proprietorship is a popular choice among business owners in India these days. It makes sense that starting a sole proprietorship business has become the preferred choice for prospective company owners across the nation, as it comes with less paperwork and simple management.

The thriving small company scene in India contributes to the model's appeal by drawing people who are ready to launch their businesses without making substantial financial commitments. It is a great option for individuals who want to dabble in entrepreneurship because of its simplicity and accessibility.

Businesses such as retail stores, home-based businesses, grocery stores, boutiques, parlours, and other local businesses can be established as a sole proprietorship ventures.

Key Features of Sole Proprietorship

There are several features of sole proprietorship business structure in India. The key features are as follows –

• A sole owner
• Control over management and decisions of the organization
• No profit sharing
• Limited existence
• Unrestricted Liabilities
• The owner’s identity is the business’s identity
• Low-cost Setup
• Taxation Benefits

Benefits of sole Proprietorship Registration

Sole Proprietorship Registration is becoming popular day-by-day in the country because of its vast advantages from setting up to functioning business activities. The benefits of Sole Proprietorship Registration in India are as follows –

1. Control

The owner gets complete control over the firm's management and decisions without outside interference. They have the authority to completely control the business expenses, assets, revenue, and other business operations.

2. Easier Setup Process

It is very easy to set up a Sole Proprietorship in India since there is less paperwork and formalities to follow for registration.

3. Lesser Compliance

Sole proprietorship registration comes with considerably less compliance as per the law. Since these are not registered under the Ministry of Corporate Affairs, there is no need to audit and comply with the regulations on time.

4. Flexibility

There is a lot of flexibility for the owner in decision-making, handling operations, and management of the firm in a Sole Proprietorship.

5. Taxation Benefits

Sole Proprietorship Registration comes with taxation benefits as well since it has fewer tax compliance requirements. These are taxed as individuals, and the owner has enough deduction claims available for any losses or business expenses.

6. Lower Cost

The setup and business activities involve low-cost requirements since there are not enough compliances to be met and licenses to be taken to run a Sole Proprietorship. 

Basic Requirements for Sole Proprietorship Registration

The basic requirements for a Sole Proprietorship Registration in India are as follows –

• A valid and unique business name
• Single owner
• The Shop & Establishment license from the authorities
• GST Registration Number of the Firm
• Utility bills
• Bank Account of the entity
• Income Tax returns of the previous financial year of the owner

Licenses and Registrations for a Sole Proprietorship Firm

The licenses and registrations required for a Sole Proprietorship firm in India are as follows –

• Aadhar and PAN card for business identification.
• Registration under UDYAM allows you to register your business as a micro, small, or medium enterprise (MSME) and avail yourself of more government benefits.
• GST Registration (Threshold Limit- 40 Lakh for Goods, 20 Lakh for Services)(Special Category States- 20 Lakh for Goods, 10 Lakh for Services)
• A new current bank account for business.
• Registration under the Shops and Establishment Act.  

Documents Required for Sole Proprietorship Registration

The registration of Sole Proprietorship requires documents of both, the Proprietor as well as the firm to be registered. The list of documents required for Sole Proprietorship Registration is as follows –

• Aadhar and PAN card
• Two Photographs of the Proprietor
• Residential Proof
• A cancelled cheque for verifying bank details
• Utility bills
• Proof of address of the business premises
• A rent agreement and an NOC from the owner are required if the business premises are rented.

Sole Proprietorship Registration Process

The process for Sole Proprietorship Registration is very simple if all the documents and licenses are already acquired by the proprietor. The process includes –

1. Documentation

The proprietor should collect all the necessary documents required for the registration, as stated above. This makes the process easy and quick, ensuring that the registration process can be completed within a few days only.

2. Unique Business Name

A unique name for the business has to be chosen by the proprietor to get it registered with the authorities. The business name must be legal and not be of some other business in the country infringing others' Intellectual Rights. It is the identity of the business; hence, a lot of thought should be given to it, making sure the name somehow represents the nature of the business.

3. Registration and Licenses

For Sole Proprietorship Registration in India, there is the requirement of a few licenses and registrations at the end of the proprietor. They need to acquire the Shop & Establishment Registration, UDYAM Registration (for small businesses, which benefits them in claiming government benefits), and GST registration certificate as well.      

4. Application & Fee Payment

The proprietor must complete the application form for Sole Proprietorship Registration, submit every document, and follow the procedure completely. After completing the application form, a required fee must be paid to complete the registration process.

5. Approval

After the registration form is submitted to the authorities, they verify it and grant approval based on the correctness of all the details. After the approval is granted, the proprietor can run the business as a sole proprietorship.    

Compliance Requirements for a Sole Proprietorship Business

Although, Sole Proprietorship comes with less compliance compulsion but still needs to follow certain compliances mandated by the law for the smooth functioning of the business entity. These compliance requirements are as follows –

1. Filing Income Tax Returns

In the Sole Proprietorship business, the proprietor has to file his/ her personal Income Tax returns before the due date either through a form ITR- 3 or ITR- 4. This helps them declare the income from the business.

2. Filing GST Returns

If a business entity is registered under GST, it has to file the GST returns regularly as per the plan, i.e., either monthly or every quarter. This is required if the goods business generates more than Rs 40 lakhs annually and the service business generates more than Rs 20 lakhs annually.

3. TDS Returns

A sole proprietorship is required to withhold tax at the source (TDS) at the appropriate rates if it pays large sums of money for goods and services or hires employees. To record the specifics of the tax deducted, the company must also submit TDS forms quarterly to the authorities.

4. License Renewal

The sole proprietorship is required to renew its registrations and licenses as soon as they expire based on the business requirements to avoid fines and penalties.

5. Adherence with Laws

The business entity should function in line with the Indian regulatory laws established to govern business activities across the country. Apart from company regulations, these also have to follow consumer laws, labour laws, environmental laws, etc.

Sole Proprietorship Registration Fees

The Sole Proprietorship Registration fees depend on the state where the business is operating. Every state has different rules and regulations to comply with, so the fees also differ in every state for registration. However, the registration fee ranges between Rs 2000 and Rs 5000 plus the additional professional charges.

Timeline for Sole Proprietorship Registration

The timeline for sole proprietorship registration depends on the documentation process. If all the documents are present, then it only takes 10 – 15 days to register a sole proprietorship in India. If any other licenses are required and not already taken by the proprietor, then a few more days might be needed to complete the registration.

Why Corpbiz for Sole Proprietorship Registration?

Corpbiz has professionals who can guide you through the legalities of the process and make sure that you get the registration within the timeline by following proper procedure. We make entrepreneurs follow every step so that they do not have anything else left while running their business through our expert consultants. We have –

• 4.7 stars Google rating
• 200+ expert registration consultants
• 250+ successful sole proprietor registrations
• 99% client retention