A sole proprietorship is an ancient and the best structure to start a business in India. In this structure, one person starts, manages, and controls a business. This structure is quite famous among entrepreneurs such as local traders, shop owners, and consultants who want to start their business in the earliest, simplest, cost-effective way. There is no law in India to regulate the sole proprietorship firm; therefore, firm registration is not required. Any person can set up a proprietorship firm by taking any registration, i.e., GST, Udyam, Shop & Establishment, Trademark, FSSAI, IEC, or any other registrations/licenses mandatory by the Government of India.
There is no legal distinction between the owner and the business entity. Therefore, the Proprietor would receive all the profits from the business and be personally liable for all losses and debts. The Proprietor has the option to use its own or different name for its trade name and can obtain a trademark on the trade name of the proprietorship firm.
- No registration is required;
- Business can be started anytime, any day, without other's permission;
- The Proprietor would receive all the profits and be liable for losses;
- Income tax on Profit levy on an individual rate/slab basis;
- No regulation on the dissolution of a proprietorship, the owner can dissolve the firm at its discretion;
- Legal right to sue or be sued by other people in a court of law;
- Low maintenance costs;
- The Proprietor itself is the decision-maker, not requiring permission from others;
- Complete control over the business, its assets, liabilities, and investment;
- Solely make decisions on the sale or transfer of assets or business;
- Easy to convert a firm into a private company
Documents required to set up Proprietor firm
- Passport size photograph
- Self-attested Pan and Address proof (Aadhaar/Voter ID/ Passport etc.)
- Mobile Number and Email ID
- Office address proof – Rent Agreement, Electricity Bill along with NOC from Landlord
The Proprietor may opt for any of the registrations mentioned below to set up the Sole-Proprietor and run a smooth business in India.
GST (Good & Service Tax) Registration
A proprietor can take GST registration from the Central Board of Indirect Taxes and Customs, Government of India, to set up a sole-proprietorship firm in India. GST registration is not mandatory in all cases, but in some cases, it is compulsory. For applying GST, a Photograph of the Proprietor in JPEG format, a Self-attested copy of Pan & Aadhaar in Pdf, Email Address, Contact Number, Business Description, Authorization Letter, and Cancelled Cheque are required to submit. The GST Registration has the following benefits:
- The Proprietor can issue tax invoices to the customer and be able to take an input tax credit against their purchases.
- GST registration would help them approach a large buyers’ market and create goodwill.
- Most e-commerce platforms require compulsory GST registration to trade goods on their sites.
- This registration would help them to sell and purchase inter-state with lesser restrictions.
A proprietor can take Udyam Registration from the Ministry of Micro, Small, and Medium Enterprises to set up a sole-proprietorship firm in India. Udyam registration is optional. The MSME registration is paperless; by only providing a self-declaration & Aadhar Number, anyone can apply for the registration.
The key benefits of registration are:
- MSMEs can easily avail of a loan facility from the bank with a lesser interest rate.
- The registration would help them to get their payment on time from their creditors.
- The MSME can apply for government tenders.
- Udyam registration would help the firm to avail of various tax rebates.
- The MSME can avail of a subsidy on patent registration.
- The MSME registered enterprises can avail of a concession on the electricity bill.
Shop & Establishment Registration
The Proprietor can take Shop & Establishment Registration from the Department of Labour to set up the sole-proprietorship firm in India. Shop & Establishment Registration is optional. In India, the state regulates the Shop & Establishment Act; therefore, the law differs from state to state. The Act covers the employee's working hours, annual leave with wages, women's & children's employment, etc.
The Proprietor can take Trademark Registration from Trademark Registration to set up a sole-proprietorship firm in India. Trademark Registration is optional. For applying for Trademark Registration, Logo in JPEG, Self-attested copy of Pan & Aadhaar in Pdf, Email Address, Contact Number, Business Description, and other details required to submit.
The Proprietor can take FSSAI registration from the Food Safety and Standards Authority of India Government of India to set up a sole-proprietorship firm in India. FSSAI Registration is not mandatory in all cases, but in some cases, it is. For applying FSSAI, Photograph of Proprietor in JPEG format, Self-attested copy of Pan & Aadhaar in Pdf, Email Address, Contact Number, Business Description, Plant Details, Site Plan Authorisation Letter, and some other details required to submit.
A proprietor can take IEC Registration from the Directorate General of Foreign Trade to set up the sole-proprietorship firm in India. IEC Registration is not mandatory in all cases, but in some cases, it is compulsory. For applying for IEC Registration, a Self-attested copy of Pan & Aadhaar in Pdf, Email Address, Contact Number, Business Description, and some other details are required to submit.
Opening of Bank Account
The Proprietor can start its business by opening a current account in the trade name. The process and documents requirement may differ based on banks.
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