Overview of Sole Proprietorship

A sole proprietorship is a type of enterprise in which business is owned and managed by an individual. In a sole proprietorship business there is no legal difference between the owner and the business. To put it in another way a sole proprietorship is not a legal entity. An owner is responsible for clearing off the debts of business. The sole proprietorship is a preferable and popular business form. It is simple and easy to form at nominal cost.

A sole proprietorship is a convenient and simplified way to commence a business in India. It is neither considered as a corporation nor a company and the business is owned by a single person who is the owner/director/shareholder of the proposed entity.

Some common examples of proprietorship business is shops such as chemist, saloons, grocery, etc.

An individual who wishes to sell his/her own products or services can run their business as a sole proprietor and can enjoy the rights provided to a registered legal company. Most of the entrepreneurs find it as an ideal business entity and have registered their business under it. The loss or profit of the company is considered as the loss or profit of the individual and the income of the company is considered as the income of the owner as per the Income Tax Act.

Registering a sole proprietorship business is a digital process that can be accompanied with the help of an expert. However, a person interested in registering as a sole proprietorship requires fulfilling some basic requirements like opening a bank account in the name of the business entity, etc.

Benefits of a Sole Proprietorship Firm

Every business structure has its own benefits. Some of the specific benefits of a Sole Proprietorship Business are:

• Individual’s Investment

  To start a sole proprietorship business, an individual who acts as a sole proprietor can invest his personal assets, other financial resources or can borrow money to commence the business activity.

• Ownership

  A single person has the hold on the entire business and is the owner of the firm. Further, that person can transfer the ownership through a will or last testament as per his/her wish.

• No profit or loss sharing

  All the income generated or the loss or debt incurred by the company belongs to the owner, and he/she cannot share it with someone else.

• Unlimited Liabilities

  This feature sometimes acts as a flaw. Since business and the owner are no separate identity, personal property of the owner can be used to pay the debts of the business.

• Fewer formalities

  With the ease of commencement, sole proprietorship comes with a few formalities before and after registration.

• Control Power

  Control power is in the hands of a single person, and he/she is not answerable to anyone else. The person should be capable of using his skills, expertise, and intelligence to carry on business activities.

Documents Required for Sole Proprietorship Registration

Documents Required for Sole Proprietorship Registration

• Aadhar of the Proprietor:

  The proprietor of the proposed firm has to submit a scanned copy of his/her aadhar card. Aadhar card is required to register any business in India. A person cannot file Income-tax return unless his/her PAN card is linked with aadhar card. In case you don’t have an aadhar card or its information does not match with PAN card, get it corrected before the submission.

• PAN card of the Proprietor

  In addition to Aadhar card, PAN card is also a mandatory document for a proprietorship business registration. PAN card is issued by the Income-tax department t of India which contains a unique PAN card number. All the details of the prerequisite documents should match with the details of the PAN card.

• Current Bank Account Details

  If the proprietor owns a PAN and Aadhar card, then he is liable to open a bank account in the name of his company. In addition to these documents, he would require identity and address proof. Documents regarding GST registration are also required to open a current bank account.

• Office Proof

  A proprietor can carry out his business activities at any owned or rented place. He has to provide proof of his registered office, documents worked as proof are:

  In case of owned property: any utility bill such as electricity bill, gas bill, water bill, etc. along with the NOC. The bill should not be older than two months

  In case of Rented property: lease/ rent agreement along with the NOC from the landlord.

  Additionally, few registrations given as follows are required for the registration purpose of the proposed firm:

• SME Registration

  Individual requires registering as an SME (small and medium enterprise) as per the provisions of the MSME Act. For it, you have to submit an online application. However, it is not compulsory but is beneficial for the company, especially during the time of loan requirement at a low-interest rate. The government has launched various schemes for the improvisation of SMEs registered under MSME act.

• Shop and Establishment Registration

  Individual must have shop and establishment license as per the local laws. It is issued by the municipal parties based on the number of workers/ employees in the firm.

• Registration under GST

  GST registration is mandatory to carry business activities in India. Even if you are doing online business, you would require a GST number. GST registration can be done in 5 working days with the following documents:

  • PAN Card of the proprietor

  • Aadhar Card of the proprietor

  • Passport size photograph of the proprietor

  • Office proof

  • Bank Statement copy that contains bank account number, IFSC code, and address

• Post Compliances

  • One has to file annual Income Tax returns on time.

  • One has to file his GST in case they have GST registration

  • If liable for TAX audits, the individual should deduct TDS (tax deducted at source) from employees income and file TDS returns