What is Sole Proprietorship?
Sole proprietorship is a form of business entity managed by a single owner who is personally liable for the profits & losses of the company. It is the simplest form of business entity with minimal compliance requirements. There is no as such registration required for sole proprietorship as anyone can easily start this business with no formalities and few compliance requirements. In case you are not having enough cash in your hands but you still want to start your own proprietary firm or proprietary company, you can easily go with this option. This form of business entity is especially popular among small traders and merchants. Liability for this form of business entity is unlimited and doesn’t have perpetual existence.
Why Sole Proprietorship is Popular in India?
Sole proprietorship is a popular form of business now days and many business entrepreneurs prefer them over other forms of business because of the following reasons –
Legal Entity Proof for the Sole Proprietorship Registration in India
If you prefer this option, Both MSME certificate and business certification by a chartered accountant is required in case of sole proprietorship registration. Sole proprietorship is considered as authenticated legal entity with the presence of both these documents. It is applicable, if you meet both the conditions mentioned below –
One of the legal entity proofs for sole proprietorship in India is GST registration that confirmssole proprietor as a registered GST tax payer. It is applicable, if you meet any of the conditions mentioned below –
Now, it’s upon you that which option you want to choose between these two to register your proprietorship firm.
Common Registrations for Sole Proprietorship
A legal authenticity of a sole proprietorship is established after getting various registrations & licenses. Some of the common registrations obtained by a sole proprietor are as follows –
Sole proprietor needs to obtain Udyog Aadhaar or MSME Registration online within the business name in order to give legal authentication to his/her sole proprietorship firm.
If goods or a service sold/provided by the proprietor crosses the GST turnover threshold registration limit, it becomes necessary for the sole proprietor to apply for GST registration.
When sole proprietor make salary paymentsto their workers on which TDS deduction is required, it is necessary for him to obtain TAN from the income tax department.
When sole proprietor is involved in a business of selling or handling of food products, it becomes mandatory for him to obtain FSSAI registration.
Import Export Code Registration
If sole proprietor is engaged in the business of import and export of goods to/from India, it is necessary for him to obtain import export code from DGFT within their business name.
Bank Account Opening for Sole Proprietorship
You must have PAN card and Aadhaar number in order to open bank account for sole proprietorship. If you are having both these documents, you can visit any bank to open your bank account. In addition to these documents, you must carry identity and address proof at the time of visiting bank. It is necessary to submit GST registration document to the bank officials at the time of opening current account.
Documents Required for Sole Proprietorship Registration
There are various documents which you need to submit in order to get yourself registered as a sole proprietor –
- If your property is rented, you need to submit rent agreement and NOC from the landlord
- If your property is self-owned, you need to submit electricity bill or any other address proof of the registered place.
How to Register Sole Proprietorship in India?
Sole proprietorship is a very common form of business entity followed by many business owners now days. There is no as such registration required in the case of sole proprietorship but it can be done in 3 ways –
Registration under Shop & Establishment Act
if you are running a business from a shop, you can register your business under shop & establishment act. Shop includes –
- A place of selling goods in retail or wholesale
- A place of providing services to customers
- It can be office, godown, store room, warehouse used for trade/business
- It does not include factories, restaurant, residential hotel, eating house, theatre, a commercial establishment or a place of public entertainment.
If you are having shop as per definition given above, you can go for sole proprietorship registration under shop & establishment act. The procedure for registration of sole proprietorship under shop & establishment act is as follows –
- Submit an application to the area inspector in the prescribed form within 30 days of starting a shop/establishment along with the prescribed fees. Application must contain the following information –
- After receiving the registration application along with fees, inspector verifies the application for its accuracy and correctness.
- If satisfied, inspector enters your details in the registrar of establishments and issues a certificate of registration for your establishment. The validity of the certificate will be 5 years and can be renewed later.
- The shop owner needs to display the registration certificate at his/her establishment.
Registration through Udyog Aadhaar under ministry of MSME
Udyog Aadhaar is a new procedure started by the government under ministry of MSME, under which a business owner is assigned with a unique identification number. Every business owner can apply for it - Be it a company, partnership or a sole proprietorship firm/proprietorship company.
By getting registered through Udyog Aadhaar, you will not only get the benefits offered by ministry of MSME but also a unique identity for your business.
Registration through GST
Another way of registering yourself as a sole proprietor is GST registration. If you are engaged in the business of selling of goods & services, you can apply for GST registration. It is mandatory to apply for GST registration –
- If your annual turnover of goods exceeds Rs.40 Lakhs
- If your annual turnover of services exceeds Rs.20 Lakhs
In order to understand, how to apply for GST registration, click here -
Advantages of Sole Proprietorship
There are various advantages that a sole proprietorship offers to a business owner –
Compliances Required for Sole Proprietorship
The most important compliances which an individual needs to follow as a sole proprietor to remain compliant and to run his/her business smoothly are as follows –
Entity Comparison Guide
|Type||Proprietorship||Partnership||LLP||Private Limited Company||One Person Company|
|Members||Maximum 1 person can start a sole proprietorship firm||Minimum 2 members and maximum 20 members can start a partnership firm||Minimum 2 members can start an LLP and unlimited number of members can join||Minimum 2 members and maximum 200 members can start a private limited company||Maximum 1person can start a one person company|
|Legal Status of Entity||It is not considered as a separate legal entity||It is not considered as a separate legal entity||It is considered as a separate Legal entity||It is considered as a separate Legal entity||It is considered as a separate Legal entity|
|Liability||Liability of the owner is unlimited||Liability of the partners are unlimited||The Liability of each member or shareholder is limited||Liability of the members are limited to the extent of share capital||Liability of the members are Limited to the extent of share capital|
|Registration||It is not compulsory to register for Sole proprietorship||Its Registration is Optional or Can be Registered under partnership Act 1932||It has to be Registered Under Ministry of corporate affairs (MCA)||It has to be Registered Under Ministry of corporate affairs (MCA)||It has to be Registered Under MCA and Companies Act 2013|
|Transferability Option||You are not allowed to transfer sole proprietorship firm to any other person||You are not allowed to transfer partnership firm to any other person||It can be transferred||It can be Transferred||You are not allowed to transfer one person company|
|Taxation||Tax paid as an individual – rate levied as per the tax slabs||Tax levied at 30% along with Education CESS and Surcharges applicable||Tax levied at 30% along with Education CESS and Surcharges applicable||Tax levied at 30% along with Education CESS and Surcharges applicable||Tax levied at 30% along with Education CESS and Surcharges applicable|
|Annual Filings||Annual income tax return||Annual income Tax Return||Both MCA annual return and income tax return||Both MCA annual return and income tax return||Both MCA annual return and income tax return|
|Know More||Know More||Know More||Know More|
What Is Included In Our Package?
Sole Proprietorship FAQ’s
As per law, No minimum amount of capital is specified in order to start sole proprietorship firm like a private company. You can start your sole proprietorship firm with any amount you like as it is not required to show on paper.
How FinacBooks Help With Sole Proprietorship Firm Registration In India?
FinacBooks is a leading Indian portal providing accounting, finance & taxation services to small businesses. We are having more than 10 years of experience helping individuals registering as sole proprietors and filing their annual tax returns at a least possible price. We will guide you through the entire process of Sole proprietorship registration. To avail the best deals on Sole proprietorship, kindly call us at 8800221252 or you can also e-mail us at email@example.com
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GSTR-7 Summary of Tax Deducted at Source (TDS) and deposited under GST lawsSep 10th ,2021
GSTR-8 Summary of Tax Collected at Source (TCS) by e-commerce operators under GST lawsSep 10th ,2021
GSTR 1 for Aug 2021 (turnover more than INR. 1.50 Crore)Sep 11th ,2021
GSTR-6 Details of Input Tax Credit (ITC) received and distributed by an Input Service Distributor (ISD)Sep 13th ,2021
GSTR-3B is a summary return to be filed by all taxpayers except those registered under the composition scheme, every month. However, from 1st January 2021, there is also quarterly filing option provided to taxpayers with annual aggregate tunrover of up to Rs.5 crore, opting for the QRMP scheme for Aug Month. (Aggregate turnover exceeding Rs.5 crore in the previous financial year)Sep 20th ,2021
GSTR-3B is a summary return to be filed by all taxpayers except those registered under the composition scheme, every month. However, from 1st January 2021, there is also quarterly filing option provided to taxpayers with annual aggregate tunrover of up to Rs.5 crore, not opting for the QRMP scheme for Aug Month. (Aggregate turnover up to Rs.5 crore in the previous financial year)Sep 20th ,2021