A Sole Proprietorship is an unregistered business entity owned, managed and controlled by a person. In India, Sole Proprietorship is the most common business form, carried out by most micro and small businesses operating in the unorganized sectors. Proprietorships are effortless to start as they have very minimal regulatory compliance requirements for starting and operating. So, it is an ideal opportunity for small businesses and first-time Entrepreneurs who would like to start a business.
Who is the Proprietor?
A Proprietor is a person who is the owner of a Sole Proprietorship business. A business owner must be a living person and can not be a legal or corporate entity. In the eyes of the law, the owner and the sole proprietor are one and the same. Therefore, the PAN and the Proprietor’s documents are the basis for all other business registrations and licenses in a Proprietorship. In case, any issues in the Sole Proprietorship business, the Sole Proprietor is held responsible for the liability.
There is no process given for the registration by the Government of India. There are no procedures or rules under the state or central government authority for registration in India. The presence of proprietorship can be determined through tax registration and business license. For example, MSME and GST Registration can be registered by the name of the owner to establish that the owner operates a business as a sole proprietor.
There are no rules and regulations for name registration for sole proprietorship business, any other business person can also use the same name for their business. Mainly proprietor responsibility to protect the business name and make it a unique name. The trademark registration under the business name.
- Starting a Business is an easy step. There is no registration requires to start a business and proprietorship. They can take payment from the clients or customers and issue an invoice without any formalities.
- There will be no additional compliance in most cases.
- The PAN should be the same as the Proprietor and Proprietorship.
- Only one rule should be following (the minimal business revenue) – Income-tax return in Form ITR-3 must be filed every year.
Proprietorship does not offer the Proprietor a host of benefits
- Separate Legal Entity – The Proprietorship doesn’t have a separate legal entity.we have to open a new bank account on the business name. It’s a lengthy process for proprietorship compare to a company or Limited liability process.
- Limited Liability Protection – The sole proprietorship does not provide any limited liability protection. In this case, any profit or loss proprietor would personally liable for the payment.
- Transferability – The proprietorship business link with the PAN of the business holder. i.e any registration is done in the name of the proprietorship it can’t transfer to any other person.
- Perpetual Existence – Sole proprietorship business and Proprietor are the same. The present sole proprietorship link to the proprietor. In case Sole Proprietor is passing away – the present of the Sole Proprietorship business would also end.
- Fundraising – A Proprietorship business cannot raise equity funds from Angel Investors, Venture Capital firms and Private Equity funds. Banks also have restrictions on the amount of money they can lend to a Sole Proprietorship business.
There are some disadvantages to operating a medium-sized or large business as a Sole Proprietorship. The registration helps only for unorganized, small businesses that will remain small and/or have a limited period of existence.
Common Registrations for Proprietorship
There are some of the following common registrations
MSME Registration: MSME or Udyog Aadhaar registration is registered in the name of the business the Sole Proprietorship is registered under the Ministry of Micro, Small and Medium Enterprises.
TAN Registration: TAN Registration obtain for the Proprietor from the Income Tax department if the Proprietor is making salary payments wherein TDS deduction requires.
GST Registration: Registration of GST must be sought if the vendor sells goods or services for registration that exceed the GST turnover limit. Registration of GST requires for service providers with annual revenue in excess of Rs.20 lakhs and for traders-annual revenue in excess of Rs.40 lakhs.
Import Export Code: Import Export Code or IE Code can be collected from DGFT on behalf of the company in the case of export and/or import of products into India from a company.
FSSAI Registration: It involves the selling of food products or the handling of food products.FSSAI registration must obtain from the Food Safety and Standard Authority of India in the name of the Proprietor.
Creating a Bank Account
A Current Account can be open for a Sole Proprietorship from various banks in India. They offer exclusive partnerships through which zero-balance current accounts can be open in India. For a Sole Proprietorship to open a bank account of GST registration be obtain.
Process for Registration
Before beginning the process, all the required documents should be collected. The manager will advise you on the type of registration to be done. The minimum period taken for the completion of registration is 3 – 5 working days, subject to government processing time and client document submission. Once the necessary registration specifies, an application submits to the Banks for the Current Account opening.
This registration offers other services like private limited company registration, one person company registration, Nidhi Company Registration, Section 8 Company Registration, Producer Company Registration, and Indian Subsidiary registration.