How to obtain Sole Proprietorship Registration in India?

Sole Proprietorship Registration is a straightforward process as it does not involve any formal or government procedures. It is one of the most opted forms of business establishments in India. Furthermore, when a single person opens a proprietor firm, then it is called a Sole Proprietorship. Moreover, you can validate your Sole Proprietorship firm by taking government licenses based on the type of business you are running. What to know more about Sole Proprietorship Registration? Keep reading this blog to know more about Sole Proprietorship firm and how to register one for you.

About Sole proprietorship firms

When a person solely runs a proprietor firm, then that type of firm is called a sole proprietorship firm. Also, this type of business has the minimum compliance and another requirement along with least registration fees. However, there is no formal way of registering a Sole Proprietorship firm. Thus, you can obtain other government licenses and authorizations to prove the validity of your business. 

Key features of a Sole proprietorship firm

The key features of a sole proprietor firm are as follows;

1.  Single ownership
2.  Common identity
3.  Unlimited liability
4.  Not governed under any special legislation
5.  Only one person is the owner of all the profits and losses coming from the business
6.  It is tedious to manage, raise and maintain capital

Who can choose Sole proprietorship registration?

Any person who wishes to initiate a business with minimal investment amount can go for this type of entity model. You can get started within 10-15 days. Also, the complete control of the entity is solely in your hands.

Advantages and Disadvantages of Sole proprietorship firm

There are various benefits and drawbacks of Incorporating a Sole Proprietorship Firm. Let’s look at them one by one.

Benefits of Sole proprietorship firm

The benefits of a Sole proprietorship firm are as follows;

1.  A single person can incorporate it
2. The compliance requirements are very low as compared to other types of entities
3. It is not very expensive to incorporate this type of firm
4. Also, there is no requirement of paying any corporate taxes
5. Only one person is responsible for the decision- making and control of the business

Drawbacks of Sole proprietorship firm

1. The proprietor has limited liability. she/he is personally liable for all the profits and loss of the firm
2. The entity comes at the brink of extinction if anything happens to the sole proprietor
3. Also, it becomes difficult to raise fund as only a single person is liable for all work-related responsibilities
4. Sometimes the government also don’t prefer this kind of entity and do not offer much support to them 

Steps involved in Sole Proprietorship Registration

The procedure for registration of a sole proprietorship firm is as follows;

Step 1: Obtaining PAN

You need to apply for obtaining the Permanent Account Number or PAN from the government to be able to run your business.

Step 2: Name your business

You should always opt for a name for your entity which clearly defines the purpose of your business and is unique. Also, you need to pay attention that the title you are choosing is not in use by any other company.

Step 3: Opening Current bank account and entity registration

Then you need to open a current bank account in the name of your entity. However, as there is no requirement for formal certification, you can go for other government licenses as per the legal requirements of your business. 

Step 4: Registration under MSME

Although it is not necessary, you can go for MSME Registration or SME Registration under the MSMED Act or Micro, Small and Medium Enterprises Development Act, 2006. Getting registered under the MSMED Act can help you take benefits from the government schemes for such enterprises.

Step 5: Getting GST Registration

You can also get GST Registration if the turnover of your business exceeds the limit for the same in your respective state.

What are the Documents Required for Sole Proprietorship Registration?

The documents required for Sole proprietorship registration is very less. For example;

1. Utility Bill of the business location
2. KYC documents of the Bank
3. A license issued by the Shops and Establishment Act
4. Details of Income Tax Returns of the Proprietor
5. Address proof of the registered office
6. Bank account details
7. PAN Card
8. Aadhar  card

Although you do not need any specific registration for your sole proprietorship firm, getting these Government Licenses can help you run your business with ease:

·         MSME/ SSI Registration

·         GST Registration

·         Shop and Establishment Act License

Compliance requirements of a Sole proprietorship firm

As a sole proprietor, you need to fulfil the following compliance requirements;

1.  File income tax return annually within the stipulated time period
2.   Also, you have to file GST Returns if you are registered under GST
3.   Moreover, you would also require to deduct TDS and file TDS Return in case your entity is eligible for Tax Audits

In conclusion

The sole proprietorship is a type of firm in India that requires only one person as the owner, manager and proprietor of the entity. Such a person is solely responsible for the losses that take place in the company but also have the right at the time of profits. Not to mention, the greatest disadvantage of this type of entity is that the entity is not separate from the person itself. Additionally, any problem with the owner or death of the owner endangers the very existence of the entity. Corpbiz