What is meant by Sole Proprietorship?
In Sole proprietorship, a single trader handles the business and will receive all the profits and responsibility of losses or debits. The business is operated in the name of the business name also called a trade name.
Benefits of a Sole Proprietorship
Launching and Closing the Business is Easy
All the identity for a legal purpose is to be given by the proprietor’s readily available personal details. Hence no hassle while opening or closing the business.
Decisions are quick
- There is no need to consult anyone and do not have to wait for the availability of others to take the decision.
- On each of the matters, the decision could be taken quickly and no delay will happen.
Profits are not shared
The sole proprietor will take benefit of all the profit. Unlike a partnership, there is a need to divide the profit.
Doing compliance and filing taxes would be easy
- The proprietor needs to fill the income tax returns if the total taxable income of the firm is more than Rs 2.5 lakhs per annum.
- If the trader has an age of more than 60 years then the taxable income will be increased to Rs 3 lakhs and,
- If the age is 80 years then taxable income would be Rs 5 lakhs.
Checklist of starting the Sole Proprietorship
- In whose name business needs to be started
- Choosing the location from where the business will be operated.
- All legal documents related to the business.
- Register as a Sole proprietorship
- Current account or a business account in a Bank
Documents required for Registration
- PAN card and Identity proof having the address
- Address proof of the business from where it will be operative. For this one could give an electricity bill in the name of the proprietor, rent agreement of the business location, etc.
- Certificate from the Charted Accountant.
- SME registration
- License for Shop and Establishment Act
- Registration for GST
Ways to Register Sole Proprietorship in India
Under the Shop and Establishment Act
- Need to send the application to the required official within the 30 days of starting the work with all business details filled.
- Inspector will verify the details and give you the legal registration of the business. The validity of it would of 5 years.
Udyog Aadhaar under Ministry of MSME
- For online registration- Go to the official website and fill out the application with the required details and submit it.
- For offline Registration- Contact your near District Industry center and full fill all the requirements.
- After the submission, you will get your 12 number unique Udyog Aadhaar number for your business.
GST Registration
- Apply for registration through the official website.
- Upload all business-related scanned copies of your documents.
- Mention any 5 names of the goods you are selling
- Verify your details with E-signature or Aadhaar number.
Difference between Sole Proprietorship and Other Types of Companies
Sole proprietorship VS LLC
The basic functionality of the business is same in both the companies. The only difference is that you can share ownership in LLC.
Sole proprietorship VS Partnership
Starting a partnership company will come under the Indian Partnership Act 1932. The partnership agreement has to sign. But not such formalities in Sole Proprietorship.
FAQ Regarding Sole Proprietorship
Can I convert proprietorship into a partnership or LLC?
Yes, at moment of time you can convert proprietorship to partnership or LLC Company.
Is online registration available for the proprietorship?
Yes, there is option online registration at the official website by the govt.
Are there any disadvantages to a proprietorship company?
The major disadvantage is bearing all the losses alone. Can’t add partners.
Common businesses to run by Proprietorship?
Any small scale business such as grocery stores, food vendors, small manufactures, clothes, etc.
What would be the annual compliance in proprietorship?
Filing taxes and income tax returns are only annual compliance.
Can one register a brand name under proprietorship?
YES, on registration of the proprietorship company you can register the brand name.
What other registrations are to be done apart from opening a Bank account?
Registration will be depending on your business. You need to VAT and Service tax registration according to your business profile.
Can anybody start a Proprietorship?
Anyone who has registered a bank account under the name of the company can start a proprietorship company.
How long it will take for the establishment of proprietorship?
It normally doesn’t take long for the business to set up. Upon getting registration you can start.
