What is sole proprietorship?
A sole proprietorship is a one-person company where the proprietor runs and manages the company on their own. As a result, it is economical because there are no costs to pay at the start of the procedure. Furthermore, it is a very simple and hassle free way of getting your company up and running as no registration is required.
Some examples of sole proprietorship that we see around ourselves daily
Numerous neighborhood companies, including grocers, salons, boutiques, and retail outlets, can be set up and started as single proprietorship firms.
A sole proprietorship business can be started by even small manufacturers and traders.
Who can opt for Sole Proprietorship?
Anyone who wishes to launch a firm with less capital can choose this type of business structure. It can be begun within a week to ten days. Additionally, you are the only one who has power over the company. So what are you waiting for? Go ahead and register a proprietorship firm online.
Benefits of Starting a Sole Proprietorship Firm
The owner has ultimate authority and asserts ownership interest
The sole proprietor requires no minimum investment in capital.
Only the owner is entitled to the profit.
Tax benefit programs help prevent double taxation.
Only an annual tax return and individual tax payments are required of the owner.
No company-specific taxes need to be paid as such, it’s all upon the owner.
Disadvantages of Sole Proprietorship:
In case of a loss, sole proprietor will have to incur all expenses
There is no perpetual succession plan as is the case for corporations
A sole proprietor finds it tough to raise capital, as the firm has no separate legal entity status from the owner
Now you might wonder how a sole proprietorship is different from a one-person-company(OPC). We got you covered:
Business Registration: While in case of a sole proprietorship registration separate registration is not required, under the Company Act 2013, a one-person company needs to be registered
Setup Time : The time required to set up a sole proprietorship is minimal with maximum focus on the business and minimum focus on legal formalities. On the other hand, an OPC can be quite time consuming to set up
Conducting Audit: A sole proprietorship needs to get an audit conducted only when the turnover exceeds a certain threshold, which is not the case with an OPC.
Loan: The sole proprietor is the only person responsible for paying off any loan taken as a working capital to run the business or for other purposes. In an OPC, since there is a legal distinction between the company and the owner, loans can be taken in the company’s name and in case of non-payment, the company’s assets get liquidated and not the owner’s.
Taxation: Sole proprietorship is not taxed independently, while in the case of OPC it is taxed independently and not with the owner’s income.
How To Go About A Sole Proprietorship Registration?
To reiterate, there is no hard and fast rule for a Sole Proprietorship Registration. For the simple reason that it represents the owner's brand. However, its credibility is bolstered by opening a bank account in the business's name. The other option is to get the appropriate permits and licenses to start operating.
By Getting an Account Opened:
Accurate documentation submission is the most crucial aspect of opening an account.
License or certificate from Municipal Officials under Shop and Establishment act
Property Registration document
Rent Agreement along with utility bill
License from registering Authority
License for the concerned individual from central or state government
IEC code
Income Tax return of the proprietor (Complete)
Utility Bills
By seeking a license for business registration:
Depending on the type of business, the license issued for registration varies. Some of the crucial steps involved in the registration of Sole Proprietorship are as follows
Obtaining a Permanent Account Number (PAN) card as a business owner is mandatory. For the reason that it facilitates the filing of Sole Proprietorship tax returns, the acquisition of necessary licences and certifications, and the registration of a business. The PAN remains the same for business and proprietor. The first thing to do when starting a business as a sole proprietor is to do this
GST Registration – For manufacturing and trading enterprises in India with estimated sales exceeding Rs 40 Lakhs and Rs 20 Lakhs for special category states should get GST registration done. Even more importantly, a GST registration is mandatory for any company dealing in goods or services. Thereby, to getting GST is a good licence while seeking to create a Sole Proprietorship.
Shop and Establishment Act license- The proprietor needs to obtain the Registration Certificate under the Shops and Establishment Act of the state in which the business is located.
Conclusion:
A sole proprietorship is a very efficient form of business, if you have an idea in mind and need to start out, you don’t really have future plans laid out as of now and just want to turn your idea into reality. All you have got to do is follow the above steps and get up and running.
Furthermore, If you are familiar with Indian law, starting a sole proprietorship in India should be easy. However, this can be an extremely challenging situation for international enterprises who lack familiarity with the local legal system.
Are you a sole proprietor and are wondering how to register a proprietorship firm online? Vyapaar Pundit has got you all covered. We take care of all your needs right from advising on documents required for sole proprietorship registration to completing the entire registration process.
Written by Anusha Das