A sole proprietorship firm means a type of business entity that is owned, controlled and managed by a single person. The owner of the Business is called Sole Proprietor of the Firm. As the business is run by a natural person, there is no legal difference between the promoter and the business. The promoter himself receives all the profits. Sole Proprietorship firm does not require any formal registration.
The key feature of sole proprietorship firm is that it is very easy to start as there are less legal formalities and lesser formation costs involved.
The government of India has not prescribed any sole proprietorship firm rules and regulation in India or there is no registration mechanism for Sole Proprietorship Firm registration.
Thus, the registration of a proprietorship can only be recognized through tax registrations that the business is required to have as per the rules and regulations.
These tax registrations may include GST Registration and/or SSI/MSME / Udyam Aadhar Registration that should be obtained in the name of the Proprietor to establish that the Proprietor is operating a business as a sole proprietorship.
Shop and establishment registration
MSME Registration
GST Registration
Bank Account opening
Shop and establishment registration
MSME Registration
GST Registration
GST Return filing for 3 months
Bank Account opening
Book keeing and Tax consultation
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Every business structure renders different benefits. Following are some notable benefits offered by a Sole Proprietorship Business to its owners.
An applicant seeking to run their business affairs as a Sole Proprietor doesn't need to undergo any registration process. They only need to secure business-specific licenses or registrations to run their business legally.
Since the Sole Proprietorship model is a boon for low-cost business ideas, it is often chosen by small businesses like retail shop outlets, grocery retailers, so on and so forth.
Incorporation of business structure like a private limited company, OPC seeks significant expenditure in terms of capital procurement, which otherwise is nil in the case of the Sole Proprietorship model.
The sole proprietors serve as the sole owner of their business and rejoice uncompromised control over their profit.
The Sole Proprietorship business model doesn't come under the ambit of any specific law; hence, it is free to operate without tedious compliances. Unlike entities functioning under Company Act, 2013, they are free to work without a Certificate of Incorporation or Registration Certificate. Also, they are not obligated to disclose annual reports with MCA. However, such businesses need to stay in line with applicable GST compliances. In view of this, they are also mandated to register under the prevailing GST Act.
Tax authority doesn't treat Sole Proprietorship and Sole proprietor differently. Therefore, they do not need to address separate tax liabilities. Prevailing IT Act mandates sole proprietor to file an income tax return. It is a way to disclose profit and income generated before the tax authority for the given FY.
Please remember that tax estimation is done as per the income tax slab rates as applicable to the taxpayer. Therefore, there is no requirement of filing a separate tax return for the Sole Proprietorship firm.
Sole Proprietorship business outweighs other business structures when it comes to the decision making. It offers complete authority to the owner to take any decision regarding business affairs without intervention of anyone else.
The financial accounts of Sole Proprietor business are not exposed to mandatory auditing requirements. It only comes into play when a business income surpasses the certain turnover threshold underpinned by the concerned authority.
PAN, photographs, & Aadhar Card of the proprietor
Utility bill of the business place such as water bill or electricity bill
Bank statement copy and other details such as account number and IFSC code
Applicants can avail of GST registration by submitting relevant e-application on the GST portal.
The section below reflects the list of mandatory documents that is required for establishing a sole proprietorship business.
