A sole proprietorship is an effortless and straightforward process of starting or incorporating a business in India. The compliances to be followed by a sole proprietor in India are quite less as compared to other companies.
The sole proprietorship is the simplest business form under which one can operate their business. This business type requires no registration from a government, and hence it is quite a popular form of business in India
The sole proprietorship is not a legal entity. It merely refers to a person who owns the business and is personally responsible for its debts.
Key Features of Sole Proprietorship
Sole proprietorship means that a single person or owner of the business carries on business which can either be under a fictitious name or his name.
Attributes Of Sole Proprietorship
- The business form is popular among all traditional business owners due to its simplicity and ease of setup; as these type of business form does not require any registration or have to complete compliances performed by other companies.
- The owner is entirely responsible for all the legal obligations since a business operating as a sole proprietorship is not a separate legal entity.
- The person invests his capital in the business and is solely responsible for all the profits and losses contracted in the business.
- The area of work in a sole proprietorship is limited as the number of workers in such business are limited, and hence skills and capital are limited.
Sole Proprietorship Registration Process
The process of registering a Sole- Proprietorship is an effortless process that involves no formal registration with the government or MCA.
The First Step involved in opening or forming a company is to apply for PAN Card if it has not been applied before as it is one of the mandatory requirement for opening an account.
The Second Step Involved is applying for a current account in any of the preferred banks, in the name of the proprietorship as a separate bank account will help you in keeping track of all your profit and loss in any fiscal year.
The sole proprietor is ready for business within 15 days, and you can start your operations after the opening of the account.
Is the Sole Proprietorship Registration Necessary?
No, Registering sole proprietorship is not mandatory; it is optional for the person who intends to start a business that is small in the size of its operation or investment.
Although, the banks involved always emphasise on opening a bank account in the name of the business that you are currently operating.
Advantages of a Proprietorship
- Owners can establish a sole proprietorship instantly, easily and inexpensively
- Proprietorships carry little if any, ongoing formalities
- Owners may freely mix business or personal assets, bank account, personal retirement accounts, and even property (housing etc.)
Disadvantages of a Proprietorship
Consider the preceding paragraphs carefully before selecting a sole proprietorship as your business form. Accidents do happen, and businesses go out of business all the time. Any sole proprietorship that suffers such an unfortunate circumstance is likely to become a nightmare for its owner quickly
- Owners are subject to unlimited personal liability for the debts, losses and obligations of the business
- Owners cannot raise capital by selling an interest in the business.
- Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value.
When to Register a Proprietorship
You may already be operating a sole proprietorship. A sole proprietorship is generally formed only when you about begin your business. Later on, usually business converts themselves into other complex forms Such as One Person Company or Private Limited Company; Depending upon the need of your business requirement.
Other License Registration
A sole proprietor requires to obtain specific mandatory license registration whereas other licences are optional requirements and the owner of the business can decide upon them.
India now follows a unified taxation system, i.e. GST (Goods and Service Tax), and hence no multiple registrations are required for filing different tax returns. The GST registration is necessary although GST return filing is optional if your annual turnover is less than 20 lakh Rupees. If you are involved in online business, you need to obtain GST registration mandatorily.
Trade license is mandatory and must be obtained within 30 days of starting operations. The application for the registration is filed with the local municipal office and the officials then after surveying the operational area will grant the business owner the license. If you fail to obtain the license, it is possible that your operating business might be shut down and you won't be able to work unless the penalty is paid and a license is obtained.
Get your proprietorship registered as a small and medium-sized enterprise (MSME) to obtain various benefits such as Loans at a subsidised interest rate whenever the person requires capital for his business operation.
The government of India establishes various other MSME schemes that make getting MSME loan approval swifter and effortless.
Sole proprietorship starts its operation with a fictitious name and all the activities carried out by the company are in that particular name. If the Trade name of your proprietorship is unique and your business is up and running, it is possible that another person or company can use the name for their business or product. Hence, register a trademark today and save your brand and Trade name.
- How To Register Sole Proprietorship Firm in India
- MSME in India: Govt Benefits, Process and Documents Required
- Procedure for opening a bank account for Sole Proprietorship
- What is the Process for Registering a Company in India?
- What is Trade License?
- OPC to Sole Proprietorship
- What is One Person Company?
- MSME Loans in India: Eligibility and Documents Requirement
- Board Resolution for Opening Bank Account
- Partnership / Proprietorship vs. Company