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Sole Proprietorship Registration

Register your Sole Proprietorship in India - Easy & Fast

Within 10 working days

A Sole Proprietorship is a type of organization you can set up to run your business.

As such they need to be registered with the Ministry of Corporate Affairs (MCA) and are subject to relevant Rules and Regulations

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Your Sole Proprietorship with Targolegal

What is a Sole Proprietorship?

Sole Proprietorship Business is an unincorporated business that is owned and managed by a single person.

As the business and the owner are not legally separate, it is the simplest form of business structure. It is also known as individual entrepreneurship, sole trader, or simply proprietorship.

The business owner, also known as a proprietor or a trader, conducts business using their legal name. They may also choose to do business using another name by registering a trade name with their local authority.

This type of business is the easiest and cheapest form to start. For this reason, it is common among small businesses, freelancers, and other self-employed individuals.It is not necessary for a sole proprietorship to be registered with any statutory Law like Company Law / LLP Law / Partnership Act etc.

Proprietorships are recognized by other registrations, such as a Service Tax registration or GST or MSME or Shop and Establishment Act.

Features of Sole Proprietorship

  • Sole proprietorships are the simplest form of business structure and are easy and cheap to start due to few government rules.

  • Proprietors enjoy full control and profits from the business but incur unlimited legal liability personally.

  • Sole proprietorships are limited by the amount of capital available, the ability to get outside assistance, and a potential shortfall of needed skills to be successful.

Importance Of Registration

Benefits of sole Proprietorship

  • i) The easiest and cheapest way to start a business
    The process of establishing a sole proprietorship is generally an easy and inexpensive process, unlike forming a partnership or a corporation. Compared to other business forms, there is very little paperwork a proprietor needs to file with their local authorities. As a result, proprietors do not have to wait long before they have permission to carry on a business.It can be set up and become operational within as little as 15 days. The start-up fees are also low, in line with many government policies that encourage entrepreneurs to take risks and grow the economy by minimizing the friction of starting new businesses.

  • ii) Few government rules and laws
    There are very few government rules and regulations that are specific to proprietors. Sole proprietors must keep proper records, file, and pay taxes on the business income and other personal income sources. Record keeping and tax filing obligations are generally no more complicated than maintaining records for individual tax filings.

  • iii) Full management control
    Proprietors control all aspects of their business, including production, sales, finance, personnel, etc. This degree of freedom is attractive to many entrepreneurs, as the venture's success also means personal success. To be successful, proprietors must be "good enough" at the various aspects of their business they have control over. While some proprietors have employees and delegate some of their authority, they are ultimately accountable for all the decisions and acts of their business.

  • iv) Flow-through of business profit
    There is no legal separation between the owner and the business, so the owner gets 100% of the profits. Although all profits go to the owner, taxes are paid once, and proprietors pay taxes individually. Proprietors must pay individual taxes on the income periodically, for example, as part of the annual individual tax filing. Tax payments may be more frequent, for example, quarterly, depending on local tax rules. Making regular payments can help a proprietor keep their tax burden from becoming overwhelming and incurring tax penalties. Tax advisors can help proprietors estimate taxes so they can set aside enough of the profits to make mandatory government payments.

    • Registration Conditions

    For a Sole Proprietorship business, registration is not required as it is identified through alternate registrations, such as GST registrations. However, its liability is unlimited and it also doesn't have perpetual existence.

    • Obtain an Aadhar card.
    • Apply for a Pan Card
    • Open a bank account in the name of the business for the proposed sole proprietorship
    • Secure a Shop and Establishment Act License
    • Register under GST.

    Incorporation Process

    There is only a requirement of opening a bank account in the name of the proprietorship firm or obtaining the licenses required for conducting the business. To open a bank account for a sole proprietorship, the RBI's KYC norms dictate that any of the two of the following document must be submitted to the bank:

    • A certificate/license issued by Municipal authorities under the Shop & Establishment Act.

    • The license issued by Registering authority like the Certificate of Practice issued by the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India, Institute of Company Secretaries of India, the Indian Medical Council, Food and Drug Control Authorities.

    • The registration/licensing document issued in the name of the proprietary concern by the Central Government or the State Government Authority/ Department, etc.

    • The banks may also accept the IEC (Importer Exporter Code) issued to the proprietary concern by the office of the DGFT as an identity document for opening the bank account etc.,

    • Complete Income Tax return in the name of the sole proprietor where the firm's income is reflected, duly authenticated, and acknowledged by the Income Tax Authorities.

    • The utility bills such as the electricity, water, and landline telephone bills in the name of the proprietary concern.

    • Issue of GST Registration/Certificate.

    Documents Required

    Documents Required For Sole Proprietorship Registration

    You need to have the following set of documents for proprietorship registration in India:

    • Copy of PAN card of proprietor (self attested)
    • Copy of address proof of proprietor (self attested)
    • Authorization Letter approving Targo Legal to appear on Behalf of you (we will prepare)
    • Signed copy of Proprietorship Charter (we will prepare)
    • Copy of Rental Agreement of premises.
    • E-mail Address and mobile number of the Proprietor

    Compare your options before before going for OPC registration

    Every entrepreneur/promoter should take the pain to know about the pros and cons of these legal forms before going for partnership firm registration in Bangalore

    PRIVATE LIMITED COMPANY

    LIMITED LIABILITY PARTNERSHIP

    PARTNERSHIP

    ONE PERSON COMPANY (OPC)

    SOLE PROPRIETORSHIP

    Do I need a Registration?
    Yes, Ministry of Corporate Affairs registers Private limited company under the Companies Act, 2013
    Ministry of Corporate Affairs registers an LLP business under the Limited Liability Partnership Act, 2008.
    Yes, Register with Registration of Firms
    Yes, Ministry of Corporate Affairs registers One Person Companies under the Companies Act, 2013
    No legal requirement to do so.
    What type of business names can I keep?
    Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLPs or companies
    Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLPs or companies
    Firm can use any name that he likes, but avoiding names already trademarked is advisable
    Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLPs or companies
    Promoter can use any name that he likes, but avoiding names already trademarked is advisable
    How risky is it for me?
    Private Limited Company is a separate legal person in the eyes of law, registered under Companies Act 2013. So, the shareholders are not responsible for business liabilities.
    "LLP" is a separate legal person in the eyes of law, registered under LLP Act 2008. So, the partners are not responsible for business liabilities.
    Partners will stand liable for the liabilities of the business
    OPC is a separate legal person in the eyes of law. So, the share holder is not responsible for business liabilities.
    Promoter will stand liable for the liabilities of the business. Because the business is not considered as a separate legal person/entity
    To what extent is each member of the business liable?
    Liability is limited to his/her share capital contribution.
    Liable to the extent of their contribution (in money, in kind or in services extended) to the LLP
    Unlimited liability
    Liability is limited to his/her share capital contribution
    Unlimited liability.
    Tell me the minimum membership limit
    2 People
    2 People
    2 People
    1 Person
    1 Person
    Is foreign ownership allowed?
    Yes
    Yes
    No
    NA
    NA
    How much will I get taxed
    Profits get taxed at 25% plus cess and surcharge. Is applicable if profit exceeds 1 Cr
    Profits get taxed at 30% plus cess and surcharge. Is applicable if profit exceeds 1 Cr
    Profits get taxed at 30% plus cess and surcharge. Is applicable if profit exceeds 1 Cr
    Profits get taxed at 25% plus cess and surcharge. Is applicable if profit exceeds 1 Cr.
    Individual income tax slab of the proprietor is the basis of taxation.
    What are my annual tax filing norms?
    Every financial year Private Limited Company must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately.
    Every financial year Annual Statement of Accounts & Solvency and Annual Return with the Registrar Plus, Income Tax must be filed separately.
    Only Income Tax must be filed for the income of firm and partners.
    Every financial year OPC must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately
    Only Income Tax must be filed on the basis on proprietor's income.
    Is Annual Audit Required?
    Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs
    Statutory audit is to be conducted if partners contribution exceeds 25 lakhs or turnover exceeds 40 lakhs. Income tax audit is applicable if turnover exceeds 2 Crs
    Only income tax audit is applicable if the turnover exceeds limit of 2 Cr
    Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs.
    Only income tax audit is applicable if the turnover exceeds limit of 2 Cr.
    Can I convert my business into any other legal form?
    Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company.
    Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company.
    Yes, Partnership can be converted into a Private Limited Company or LLP
    OPC could be converted into any legal form. But, it depends on the number of promoters, business operations, funding requirements and other factors. Limited Liability Partnership or Private Company is preferred by promoters when seeking expansion of their OPC
    No
    Compulsory Conversion to Private Limited Company Applicable?
    NO
    NO
    NO
    NO
    Yes, if turnover exceeds 2 cr
    Know More
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    FAQ

    Who can start sole proprietorship in India?

    Any Indian can start a sole proprietorship in India.

    How long does it take for proprietorship registration?

    It takes around 10 working days to complete the registration process.

    What is a sole proprietorship?

    It is a type of business model that is owned and controlled only by one person.

    Can the sole proprietorship use any name?

    A name can be used for the sole proprietorship as long as it is not offensive to carrying out the business.

    How can Targo Legal help me with proprietorship registration?

    At Targo Legal, we have a dedicated team to help you with the registration process from the start to the end.

    What is a sole trader and a sole proprietor?

    Both the words sole trader and sole proprietor will include an individual that carries out the affairs of the sole proprietorship business.

    Can a sole proprietorship be converted to a limited company?

    Yes the business of a sole proprietorship can be converted to a company. The registrar of companies has to be informed about this.

    Is it mandatory for a sole proprietor business to be registered?

    No it is not mandatory for the business of a sole proprietor to be registered. However, during financing process, banks may insist sole proprietor businesses to be registered.

    Can a sole proprietor hires employees?

    Yes employees can be hired for sole proprietors. Small scale business entities and MSMEs get major work done through employees and labourers. There is no limit on the amount of work force that can be employed in a MSME.

    Can FDI be allowed in a Proprietorship firm?

    Yes Foreign Direct Investment is allowed in a sole trader firm. However, there are specific conditions which have to be followed for receiving foreign direct investment under sole proprietorship registration.

    Are there any disadvantages of running a sole trader business?

    Yes, the main disadvantage is the principle of limited liability would not be applicable to this form of business entity. Apart from this, the liability of the business falls on the sole owner of the business.

    How to register a proprietorship?

    You need to select a name and address for your business and get it registered with the concerned Registration Authority, open a current account in a bank and start your business. You can also contact us for any support during the registration process.

    Can the name be changed for a sole proprietorship firm?

    Yes the name can be changed for a sole proprietorship business. The change of name has to be intimated to the public through public and government notices. Apart from this the sole trader has to inform all the respective parties for the change of name.

    Can others invest in my sole proprietorship business?

    No, this kind of business is owned and operated by one person only. So, others can’t invest in this business. However, you can transfer to a different business model if you want to accept investors. Nurturelabz can help you with the transfer and the new registration.

    Do I have to register for GST for my proprietorship company?

    There are numerous conditions for GST registration such as your annual income, products you sell/services you offer, mode of business and more. Consult us and we can help you with sole proprietorship registration as well as GST registration.

    When would GST registration be applicable for a sole trader?

    Only when the threshold reaches a particular extent then GST registration would be required for the sole proprietor business. This threshold is as follows:

    • 20 Lakh- for service oriented business
    • 40 Lakh- for trading business.

    Are there any compliance required after forming a sole proprietorship?

    Yes the following compliances are required after forming a sole proprietorship firm:

    • GST Registration
    • Financial Documents
    • Income Tax Returns
    • Any registrations which have to be carried out under respective authorities.
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