How to Start a Sole Proprietorship Registration

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Overview of Sole Proprietorship Firm Registration

As we know, India is one of those countries which is full of people who are managing and operating their business by choosing Sole Proprietorship as their business structure. Moreover, this business model requires compliance with very few legal formalities and is suitable for the people who do not have adequate capital. Further, sole proprietorship registration is required for the businesses which are owned, managed, and controlled by a single individual, as it will eventually help them in carrying out business operations with ease and flexibility.

Nowadays, the Sole Proprietorship as a business model is mostly chosen by the micro and small enterprises with less investment, operating in the unorganized sector. Moreover, it is also ideal for the embryonic entrepreneurs who want to start their own business. Lastly, some of the examples of a sole proprietorship are salons, grocery stores, chemist shops, photo studios, etc.

What is Sole Proprietorship?

The term Sole Proprietorship refers to a business structure that is simplest and easiest to form and also requires compliances with minimal legal formalities. Moreover, there is no such formal regulating act prescribed for governing the registration of sole proprietorship.

Further, the concept of Sole Proprietorship does not enjoy the status of a separate legal entity, and also the ownership of a sole proprietorship firm is not qualified to be transferred to another individual. Hence, the existence of the business will come to an end with the death of the owner.

Who is a Sole Proprietor?

A living individual who is the owner of the sole proprietorship firm is known as the Sole Proprietor. Moreover, he must be both an Indian citizen and also a resident. Further, a Sole Proprietor is solely entitled to all the profits earned in the firm and also solely and personally liable to bear all the losses incurred.

Hence, as per the concept of the Sole Proprietorship, there is no legal dissimilarity between the owner and business. Furthermore, it shall be relevant to take into consideration that a corporate entity is not eligible to become the Sole Proprietor of the firm.

What are the Advantages of the Sole Proprietorship Firm?

The benefits or the advantages of a Sole Proprietorship Firm is enumerated below:

  • The Proprietorship firm is not obligated to obtain Compulsory Registration.
  • An individual who wants to start a sole proprietorship firm can do it without following any formalities.
  • Another significant advantage annexed with the concept of sole proprietorship firm is the minimum compliance requirement.
  • A Sole Proprietorship firm is not required to get its accounts audited statements with the MCA (Ministry of Corporate Affairs) each year.
  • A Sole Proprietor having an income of less than Rs 2 lakhs is not supposed to pay the income tax.
  • A single person can easily start a Sole Proprietorship Firm.
  • For the Sole Proprietorship Firm Registration, there is no such minimum limit prescribed for the capital requirement as it depends upon the sole owner and his will.

Why should one opt for a Sole Proprietorship Firm?

The following listed are the reasons as to why should one choose a Sole Proprietorship Firm:

  • Provides flexibility in carrying out the business activities
  • One of the oldest, most straightforward, and most accessible forms of business models
  • Single hand control
  • Easy to start and close
  • Hassel-free business structures, that, too, with very few compliances.
  • Self-Accountability
  • Owner of the Sole Proprietorship Firm is considered to own boss. This means he is not answerable and accountable to any shareholder and director
  • Decision-Making power
  • The Sole Owner is not required to share income and profits generated with anyone
  • No chance of any dispute between the partners or directors or shareholders.

How to start a Sole Partnership in India?

In total, there are only two requirements that are to be followed while incorporating or establishing a Sole Proprietorship Firm in India. The following listed are the two requirements that are to be complied with for commencing or setting-up a Sole Proprietorship Firm –

  • Choose a Unique Business Name.
  • Choose a Location as the place of carrying out business.

After fulfilling these two requirements, one can legally start doing business.

What are the Documents Required for Obtaining Registration of a Sole Proprietorship?

The following listed are the documents required for obtaining Sole Proprietorship Registration:

  • PAN (Permanent Account Number) Card
  • Aadhar Card
  • Bank Account
  • Registered Address Proof

Further, a Sole Proprietorship Firm does not require any specific registration. However, in order to run a business smoothly and with ease, the owner of the business is required to get registered under the following listed:

  • GST Registration
  • MSME Registration
  • Registration under the Shops and Establishment Act

Other documents required for the registration of sole proprietorship firm are as follows:

  • License or the Certificate issued by the Municipal Authorities
  • CST (Central Sales Tax) or VAT (Value Added Tax) certificate
  • ITR (Income Tax Returns) documents
  • Certificate granted by the Sales Tax or Service Tax or Professional Tax authorities
  • Certificate allotted by the Food and Drug Control Authorities, IMC (Indian Medical Council)
  • IEC (Import Export Code) allotted to the Sole Proprietor by the office of DGFT (Director General of Foreign Trade)
  • Utility bills in the form Water Tax Bill, Electricity Bill and the Landline Telephone Bills issued in the name of the concerned Sole Proprietor.

Sole Proprietorship Registration Procedure

registration process for soleproprietorship firm

A Sole Proprietorship is formulated by way of various other registrations and licenses. Some of the standard registrations to be followed to obtain a Proprietorship Firm are as follows:

  • MSME Registration

    MSME (Micro Small and Medium Enterprises) or the Udyog Aadhaar registration can be acquired in the name of the business in order to establish that the concerned Sole Proprietorship firm is registered under the Ministry of Micro, Small and Medium Enterprises.

  • TAN Registration

    TAN (Tax Deduction Account Number) Registration should be obtained for the concerned proprietor from the IT department. However, the said proprietor is required to obtain TAN Registration only if he or she is making salary payments in which TDS (Tax Deducted at Source) deduction is required.

  • GST Registration

    GST (Goods and Service Tax) registration should be obtained by the Proprietor, if he or she is selling goods or services that exceed the prescribed threshold of GST turnover for registration.

Further, in most of the states, GST registration is needed for those service providers who are having an annual turnover of more than Rs 20 lakhs, and in the case of traders, the annual turnover must be more than Rs 40 lakhs.

  • Import Export Code

    An Import Export Code (IEC) can be acquired from the DGFT (Director General of Foreign Trade) in the name of the business. However, the same is possible only in case the said Proprietorship firm is dealing in the export and import of goods into India.

  • FSSAI Registration

    FSSAI Registration is required only in the case where the proprietorship firm is involved in the business of selling food products or in the handling of food products. Further, an FSSAI registration is obtained in the name of the Proprietor from the FSSAI (Food Safety and Standard Authority of India).

Compliance Checklist for Sole Proprietorship Firm

compliance for sole proprietorship firm

The that are must be complied with after obtaining sole proprietorship registration are as follows:

  • TDS (Tax Deducted at Source) Filing
  • Filing of Income Tax Return (ITR)
  • GST (Goods and Service Tax) Compliances
  • Drafting of Financial Statements
  • Tax Audit Compliance
  • Documentation of the Invoices concerning sales and purchase

Why Choose Swarit Advisors?

  • Swarit Advisors provides end to end assistance regarding the registration process.
  • While assisting in the process of registration, we will fill the form on behalf of our client and also help them in submitting the documents.
  • We will keep track of the whole registration process and will continue to guide our clients
  • We keep high touch communication with our valuable clients and also promptly reply to them.
  • For us, client satisfaction is paramount
  • We are committed towards the quality work
  • We help our clients in solving their business issues also ensures continuous networking of the business.
  • We provide instant and immediate responses to requests made to us.
  • We have a wide range of skilled, professional, and experienced experts who will provide friendly knowledge support, affordable hosting solutions and also ensures a successful online presence.
  • We at Swarit Advisors help our clients even with the post-incorporation compliance requirements.

Frequently Asked Questions

No, there is no need to get a Sole Proprietorship Firm registered in India. It is completely optional and depends on the discretion of the Sole Proprietor. However, banks insist on getting the firm registered if the owner or the sole proprietor intends to open a bank account opened in the name of the business.

Yes, it is mandatory for the owner of the proprietorship firm to obtain GST Registration in cases, such as the annual turnover exceeds the prescribed threshold of Rs 40 lakhs and Rs 20 lakhs; Reverse Charge Mechanism; Agents and Input Service Distributor; E-commerce Aggregator; for providing information, database and retrieval services to the person residing outside India.

The term “Sole Proprietorship Registration” means registering an unregistered business that is owned, controlled, and managed by a single person known as the Sole Proprietor of the firm.

Yes, a sole proprietor has the authority to appoint an employee. Further, no upper limit is prescribed on the maximum number of employees that a sole owner can appoint.

Yes, a Sole Proprietor is the owner of the Sole Proprietorship Firm.

Small Businesses, such as Grocery stores, Photo Studios, Barbershop, IT consultation services, etc., are the best examples of a Sole Proprietorship Firm.

A Sole Proprietor being the business owner has complete control and authority over the business operations and is entitled to receive all the profits and gains. However, he is also liable to bear all losses incurred in the business.

The owner of the business needs to satisfy some compliance after obtaining a Sole Proprietorship Firm Registration. The term compliance includes TDS Return Filing; ITR Filing; GST Return Filing; Drafting of Financial Statements; Tax Audit; Documentation of Invoices for sale and purchase.

The advantages of a Sole Proprietorship Firm Registration are individual investment, ownership, no sharing of profit and loss, fewer compliances, full control and authority over business affairs.

In India, a sole proprietor can start multiple numbers of Sole Proprietorship businesses under his name.

No statutory fees are involved in the process of registration, only the cost for obtaining other registrations like GST and MSME is required.

No, a minor cannot start a sole proprietorship business in India. Only a person who is at least 18 years of age can start a sole proprietorship in India.

No, a sole owner is not entitled to pay a salary to himself. However, if he does so, it means he/she is transferring funds from one account to another.

A sole proprietorship business does not come under the ambit of income tax as a separate legal entity. However, one must report all his/her business income or losses in the personal income tax return.

Yes, one can use his/her name as the name of the business.

A Sole Proprietorship Business ceases to exist after the death of the sole proprietor. Further, all the assets and liabilities of the business become part of the deceased’s estate.

A sole proprietorship is a business entity that is owned and run by a single person who is the sole trader or proprietor. In this, there is no legal difference between the business entity and the owner.

In India, there is no specific government registration needed for starting a sole proprietorship business. However, one can register his sole proprietorship firm under the MSME or Shops and Establishments Act.

A Sole proprietor can open the current account by submitting required documents such as License issued by the Municipal Authorities, Income Tax Returns, VAT/CST certificate. Certificate granted by the Service Tax/ Professional Tax/ Sales Tax authorities, Certificate granted by the Food and Drug Control Authorities and Indian Medical Council as an address and identity proof.

If a sole proprietor is generating both professional income and income from business then he may go ahead filing ITR-3 or ITR-4 for the presumptive scheme of Income Tax.

A sole proprietor can apply for the PAN (Permanent Account Number) card by filing Form 49.

There is no such fixed procedure for winding up or closing a sole proprietorship business in India. However, a sole owner needs to inform his employees that he is closing the proprietorship firm.

The amendment or modification in the name of the proprietorship firm is made by giving the public and government notice, cancelling or changing DBA, structuring sale agreement, and notifying all the interested parties.

The current bank account opened in the name of the Sole Proprietorship Firm will act as proof of the existence for the firm.

Yes, one can convert a sole proprietorship firm into a private limited company by registering it to the Registrar of Companies within thirty days after making an application. All the assets of the sole proprietorship firm will be transferred to the newly incorporated private company.

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