Overview

A sole proprietorship is one of the common forms of business in India other than One Person Company, Public and private limited companies. In this kind of venture, one individual is responsible for carrying out the entire company's business operations. The business owner has complete freedom to involve others in the day-in and day-out procedures if he chooses to do so. Unlike a one-person company, this form of business has fewer compliance obligations. In terms of cost, incorporating a sole proprietorship business is less expensive than an OPC. Proprietorship Registration, however, should be done with proper planning because there are no set rules. Hence, it would be wise to consult experts on other necessary permits, which could increase the legal capacity of the business. A general rule of thumb is proposing those with little capital and insufficient time to establish the business venture as a sole proprietorship.

Requirements of Proprietorship Registration

There are specific requirements that the sole proprietorship company needs to fulfill, which are listed as follows:

• ITR filing : A sole proprietorship business owner must file income tax returns in forms ITR3 and ITR4.


• GST filing : The sole proprietorship business owner must file GST returns monthly and quarterly once the business crosses the threshold of 40 Lakhs.


• Declaration of Income : The sole proprietorship owner must file the business's income in ITR 3 and ITR 4.


• TDS filing : TDS Filing for the employees must be done every quarter in case goods and services are offered beyond the threshold mentioned.

Characteristics

The characteristics of a Sole Proprietorship business are as follows:

• Authority of Control : In proprietorship registration, the owner has complete authority over the concern. In this case, the proprietor manages the daily operational operations entirely unilaterally, hence requiring no consultation whatsoever with any other members, such as the shareholders or the company directors, because they are the only members of the company.


• No Separation of Legal Identity : The business in a sole proprietorship does not have a distinct legal identity. As a result, the proprietor is fully responsible for all business obligations; therefore, in case of loss or bankruptcy, the proprietor's assets might be seized to pay off the debt.


• Taxation : For a sole proprietorship, there is no corporate tax. The proprietor pays personal income tax. Further, the Sole proprietorship firm must be registered under GST if the business turnover exceeds Rs.40 lakhs (Rs.20 lakhs for some states).


• Compliances : Limited compliances are involved in integrating a sole proprietorship company with little or no post-incorporation compliances. For example, the proprietorship company has no obligation to present its accounts, which is a mandatory aspect in other forms of companies.


• Privacy : Privacy is more abundant when dealing with sole proprietors rather than one-person companies. No public portal or government authority will require a business report for disclosure.

Sole proprietorship provides autonomy over work, simplified compliance requirements on various issues like employment laws, and a simple taxation system, which makes it desirable in this regard.

Advantages

• A sole proprietorship company is the easiest way to start a business when there is little compliance compared to other company forms.


• Secondly, the sole proprietor is the sole decision-maker of the business; therefore, there can be no conflict in the business decision-making.


• The tax rate for sole proprietor company is much lower than a limited company tax rate.

Disadvantages

• The sole proprietor has unlimited liability against the business operations; therefore, if the business runs into bankruptcy, then the sole proprietor will be unlimitedly liable and even his property can get confiscated.


• The business can end due to the death or long-term illness of the sole proprietor if there is no other person to take over the business.


• The sole proprietor might face difficulties in raising capital for business purposes, as lenders are more likely to invest in a company due to the transparency of the business affairs.

Documents required

There are certain documents required for a proprietorship firm registration as follows:

• PAN Card


• Aadhar Card


• Details of bank account


• GST registration


• Permanent office address


• License for Shop and Establishment Act


• Registration of small and medium enterprises

Registration Process

The process of proprietorship registration involves the following steps :

• The first and most important step is to select a proper name for the proprietorship business.


• The next step is to apply for a PAN card, which would be used for all the business purposes, the proprietor is not required to apply for PAN card if they already have one.


• Now, for the business, a bank account would be required in which all the transactions the business would take place.


• Specific registration, such as the Shop and Establishment Act registration certificate, must be applied where the business is established.


• The business can also register under the Small and Medium Enterprises Act, to get some additional benefit.


• The proprietor would also have to apply for a GST registration in case the business turnover exceeds 40 lakhs.

Why Adviso?

Adviso's Proprietorship Registration involves various requirements, document preparation, and pre-and post-compliance obligations. The incorporation of a Sole Proprietorship can be a tedious process without professional support. That’s where Adviso comes in. At Adviso, we provide expert services for the online company registration on the MCA website. Our Lawyers, CA, and CS experts will guide you in every step of the journey to ensure your company lists smoothly and efficiently.