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Sole Proprietorship Registration
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Online Sole Proprietorship Registration in India
A Sole Proprietorship is a type of business that is owned and managed by only one person and the owner of the business is called a Proprietor. This type of business is the most common form of business that is used in India. In India, you can commence this business with minimum regulatory compliance. However, there is no full-fledged way available to get Sole Proprietorship Registration by the Government of India. Tax Registration & other Business Registration is the correct way to show the legal existence of your proprietary business. Moreover, the business structure as a sole proprietorship company includes individual freelancers, growing start-ups, and settled & creative businesses comprising physical workplaces.
A Sole Proprietorship is a business owned and run by one person, known as the Proprietor. It’s the most common type of business in India, offering a straightforward way to start with minimal regulatory requirements. While the government doesn’t have a dedicated registration process for sole proprietorships, showcasing the legal existence involves obtaining tax registration and other necessary business registrations.
For a sole proprietorship company, individuals like freelancers, budding startups, and established creative businesses with physical offices can easily adopt this business structure. If you’re looking to formalize your sole proprietorship, consider opting for tax and business registrations to establish its legal presence.
- What types of businesses in India can be Sole Proprietorships?
- Benefits of Sole Proprietorship in India
- Eligibility Criteria for Sole Proprietorship Registration in India
- Checklist for Sole Proprietorship Registration in India
- Documents Required for Sole Proprietorship Registration in India
- Procedure for Sole Proprietorship Registration in India
- Registering under the Shops & Establishments Act
- Registering through GST Registration
- Registration through Udyog or Udyam Aadhar Registration under MSME
- Compliances for Sole Proprietorship in India
- Why RegisterKaro?
- Frequently Asked Questions
What types of businesses in India can be Sole Proprietorships?
Following are the various types of businesses in India that can be Sole Proprietorships:
Grocery Shops
Fast food vendors
Manufacturing businesses
Small Traders
Repair & Maintenance Services
Parlours
Boutiques
Retail Stores
Local Transportation Services
Clinical & Medical Management Facilities
Tutoring Services and so on.
Benefits of Sole Proprietorship in India
The following are the benefits of Sole Proprietorship in India:
1. Ease of Dissolution:
Just like it is easy to start a Sole Proprietorship in India, you can also easily dissolve, sell, or terminate the same because you aren’t required to fulfil any legal formalities like obtaining TDS. Moreover, you can easily sell the assets of the Sole Proprietorship Company or Firm to a person or an association.
2. Very Less Compliance:
This type of business can be started very easily by just a single person. There is minimum compliance that needs to be adhered to get it registered. This type of business is economical as it is very less expensive as compared to a Company or LLP.
3. Sole Beneficiary of Profits:
One of the main advantages of a Sole Proprietorship is that the owner of the proprietorship is entitled to all the profits getting from the business. Unlike other business structures in India where profits are shared among shareholders or partners, the Proprietor retains complete ownership.
4. Quick Decision:
In a Sole Proprietorship, the business owner takes all the decisions and there is no consent required for any other person or individual. Hence, an owner of a proprietorship can normally make quick decisions regarding their business affairs.
5. Complete Control over the Business:
The single owner of the Proprietorship will have complete control over the business. The owner will look after all the business aspects. Since only one person is controlling the business, confidentiality can be maintained.
Eligibility Criteria for Sole Proprietorship Registration in India
Following are the eligibility criteria for Sole Proprietorship Registration in India:
Applicants must obtain GST Registration for their business
Applicant must be a tax-paying citizen
Register a Bank Account in the name of Proprietorship.
Checklist for Sole Proprietorship Registration in India
Following is the checklist required for Sole Proprietorship in India
PAN Card of the Proprietor
Registration under the Shop & Establishment Act of the respective state
Registration under GST, if the turnover of the business exceeds Rs. 20 lakhs
Bank account in the business name
Complete name & address of the business
Documents Required for Sole Proprietorship Registration in India
Following is the list of some basic documents required for Sole Proprietorship Registration in India
Documents of the applicant
PAN Card- Identity Proof
- Address Proof
- Sale Deed or Rental Agreement (in case of Shop & Establishment Act Registration
To open a current bank account, you need to submit the following documents
Documents of the applicant
- Address Proof
- Identity Proof
- PAN Card
- Existence proof of your business
- Shop & Establishments Registration
Procedure for Sole Proprietorship Registration in India
In India, a Sole Proprietorship is an easy way to commence a business. There is no legal difference between the business & the owner in the case of Sole Proprietorship. So, there are 3 different ways to register a Sole Proprietorship in India
Registering under the Shops & Establishments Act
Registering through GST Registration
Getting Udyam or Udyog Aadhar under the Ministry of MSME.
Registering under the Shops & Establishments Act
The Shop & Establishment Act allows the Registration of Sole Proprietorship for shops & establishments in India. Under the prescribed law, cafeterias, restaurants, theatres, hotels, factories, commercial facilities, or public entertainment locations aren’t considered shops. Following is the list of premises that qualify as a shop
Following is the list of premises that qualify as a shop
- If the products are sold either retail, wholesale
- Services are offered to the customer;
- This comprises offices, sheds, workplaces, or warehouses used in connection with such business whether on the same premises/elsewhere.
Following is the general process of Registration
- The Labour Department of each state is liable for registering & processing Establishment Acts
- The registration process is completely handled by an inspector in charge
- Usually, the District Labour Officer takes charge as the inspector in charge
- The inspector will provide a form to the owner
- The following details regarding the establishment & employer should be included
- Owner Name
- Name of the Establishment
- Business Address
- No. of Employees
- The date that the business opened for business
- Business category
- The owner of the business should send the application & the registration fees to the inspector in charge within 30 days of establishment
- The verification process by the inspector takes some days
- The owner of the business will get the Registration Certificate if the Registration fulfills all the requirements
- The Certificate must be shown within the premises & renewed periodically
Registering through GST Registration
If you are involved in the exchange of goods & services, you can do Sole Proprietorship Registration via GST Registration. Earlier, Service Tax & VAT Registration was needed & it is now done via GST Registration. It is the best way to get Sole Proprietorship but has some drawbacks. A business registered through this method must fulfill all the GST requirements & after collecting GST from customers, they should file GST Returns. Our experts at RegisterKaro will help you get GST Registration
Registration through Udyog or Udyam Aadhar Registration under MSME
The MSME issues Udyog Aadhar which are unique identification numbers. A single owner can apply for Udyog Aadhar with the Ministry. Compared to other methods, the Udyog Aadhar is a new method. When a Sole Proprietor registers with the Ministry of MSME, they become eligible for benefits like bank loans, reimbursements & subsidies among other things. They also benefit from getting a unique identity for their Company which is known as Sole Proprietorship Registration. The Registration process of Udyog Aadhar is very simple, our experts will help you with this.
Compliances for Sole Proprietorship in India
The following are some vital compliances for Sole Proprietorship in India
1: Filing ITR
The owner of a Proprietorship will have to file ITR using ITR-3 & 4.
2: GST Return Filing
In case the Proprietorship has GST Registration, GST returns must be filed every month as per the Scheme under which the business is registered.
3: Business Income
Once your Company Name is approved, then the next step is to prepare all the vital documents for Company Registration. At this step, MOnly ITR Forms allow for declaring business income. Hence, all proprietorships will have to file ITR forms to be compliant with the Income Tax Regulations.
4: TDS Returns
If the Proprietorship has employees or purchases products or services beyond a certain threshold, then tax must be deducted & TDS returns must be filed every quarter.
Note: Additionally, various other compliance requirements may be applicable to the Proprietorship based on location & industry
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FAQs
What is a sole proprietorship?
A sole proprietorship is a business structure where an individual operates a business as the sole owner and assumes all responsibilities and liabilities.
What are the advantages of registering as a sole proprietorship?
Some advantages include ease of setup, complete control over business decisions, simplified tax reporting, and direct ownership of profits.
Do I need to register a sole proprietorship?
The registration requirements for a sole proprietorship vary by jurisdiction. In some places, registration is not mandatory, but it is recommended to obtain necessary licenses and permits.
What are the requirements for registering a sole proprietorship?
Common requirements may include choosing a business name, obtaining licenses and permits, acquiring any necessary certifications, and completing registration forms.
How do I choose a name for my sole proprietorship?
The name should be unique, not infringe on existing trademarks, and comply with local naming guidelines. It can be the owner’s name or a creative name related to the business.
Can I use my personal name as the business name for a sole proprietorship?
Yes, many sole proprietors use their personal names as business names, such as “John Smith Consulting.”
How do I register a sole proprietorship?
The registration process typically involves submitting registration forms, providing necessary documentation, paying any required fees, and following the guidelines set by the local government or business registration agency.
What documents do I need to provide for sole proprietorship registration?
Commonly required documents include identification proof (such as a passport or driver’s license), proof of address, and any licenses or permit specific to the business activity.
Is there a fee for registering a sole proprietorship?
Yes, there may be a registration fee associated with establishing a sole proprietorship. The fee amount varies depending on the jurisdiction.
Can a sole proprietorship have multiple owners?
No, a sole proprietorship is owned and operated by a single individual. If there are multiple owners, it would be considered a partnership or a different business entity.
Do I need a separate bank account for my sole proprietorship?
While not mandatory, it is advisable to have a separate bank account for the sole proprietorship to maintain clear financial records and separate personal and business finances.
Are there any tax obligations for a sole proprietorship?
Yes, as a sole proprietor, you are personally responsible for reporting and paying taxes on your business income. Consult with a tax professional to understand your specific tax obligations.
Do I need any licenses or permits for my sole proprietorship?
The licenses and permits required vary depending on the nature of your business and your location. Research the specific licenses and permits needed for your industry and comply with all relevant regulations.
What is the liability of a sole proprietorship?
As a sole proprietor, you have unlimited liability, meaning your personal assets are at risk if the business incurs debts or legal liabilities.
Can a sole proprietorship be converted into a different business entity later?
Yes, it is possible to convert a sole proprietorship into a different business entity, such as a partnership or a limited liability company (LLC). Consult with a legal professional to understand the process and requirements.
How long does the sole proprietorship registration process usually take?
The registration process duration varies by jurisdiction. It can range from a few days to several weeks, depending on the local government’s efficiency and the completeness of your application.