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Sole Proprietorship Business

Sole Proprietorship Business Registration in India! Features, Cost, Documents, Process etc

Sole Proprietorship or Sole Trader Business is probably the most easiest and popular form of the business type of entity in India. This form of entity is preferred by the majority of small and medium businesses operating in mostly the unorganized sectors.

It simply allows starting a business even with a small amount of capital and within a very short span of time.

What is a Sole Proprietorship? – It’s Meaning

A sole proprietorship is a business entity that is owned, managed and controlled by one person. Proprietorship firms are very easy to start and have very minimal regulatory/statutory compliance.

A Sole Proprietorship or Sole Trader firm can be easily established by getting a tax registration or a license based on the nature of the business and there is NO specific registration required for the ‘Proprietorship’ itself.

General alternative registrations like – GST Registration or Professional Tax Registration or a Shops and Establishments Registration (in the name of the firm) will be sufficient to open a current bank account to get started with the Proprietorship Business.

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Characteristics or Features of a Sole Proprietorship Business Firm

One Man Show

Sole Proprietorship form of a business entity requires only one person and it is completely a One-Man Show. The business is fully owned and operated by a single person.

Ease of Starting or Winding

Due to the complete involvement and operation by one single person, and the required legal compliances being minimum, it is much easier to start and dissolve or wind up the firm.

Separate PAN not required

PAN (Permanent Account Number) issued by the Income Tax department, to the proprietor is enough to get started. No separate PAN in the name of Trade or Business is not required.

Relatively Inexpensive

Since the compliance requirements are very minimal, sole proprietorship firms are inexpensive to maintain until the turnover of the company reaches a certain turnover in business

Minimal Compliance

Compliance requirement in a proprietorship firm is very minimal as there is no mandatory audit requirement or any requirement to file forms with MCA or any other authorities.

No Minimum Capital Requirement

Essentially there is no minimum capital requirement to start the business as a Sole Proprietor. One can start doing business with any amount of money they have in hand.

Business Name

Proprietorship firms have no restriction in terms of choosing the name for the firm and does not require approval from any authorities.

Lower Tax Rates

Taxation in a proprietorship firm is as per the individual’s taxation rules. It is slab based and is taxed in the name of the proprietor itself. Business income is also taxed at personal tax rates.

Few Major Disadvantages of Sole Proprietorship Business in India

  • Client credibility could be low as winding up is simple and quick and can happen overnight.
  • It is not a separate legal entity.
  • Cannot issue shares or have partners in a sole proprietorship firm.
  • Liability is unlimited and proprietor’s personal assets can be attached in case of any default.
  • A sole proprietorship firm ceases to exist in the event of death or incapability of the proprietor.

When to consider Registering a Proprietorship firm?

One can opt for starting a Proprietorship firm:

  • If you are planning to start a business alone
  • If the business you plan to conduct does not carry any substantial risk
  • If you are a freelancer or an individual consultant
  • If you want to start the business quickly and do not want any legal compliance burden
  • If you want to test the market before plunging into full time
  • If you want complete control of your business and do not want any partners

Sole Proprietorship Firm Registration Process in India

Generally, there is no formal Government Approval or Registration is required to start a sole proprietorship business in India. Also, there is no online registration required and there is no specific procedure to fill up any form or submit any documents.

However, in order to establish a valid business identity, one may need to get any of the below Statutory Registrations.

  1. Choose a Business or Trade Name and a location for doing business.
  2. You can go for any one of the below statutory registration:
  • MSME registration
  • GST registration (Only if applicable)
  • Professional tax registration
  • Shops and Establishments registrationA Current account with any bank in the business or trading name and get started.

A Current account with any bank in the business name or trading name to get started.

List of Documents Required for Registration of a Sole Proprietorship Firm in India

  1. PAN Card of the Proprietor
  2. ID Proof of the proprietor- Voter’s ID / Passport / Driving License / Aadhaar
  3. Passport Size Photograph
  4. Address Proof of the Premises:
    • Rental agreement or Lease agreement if the premise is rented/leased
    • Latest tax paid receipt / Sale deed if the premise is owned by any of the Directors
  5. Latest Electricity bill / Telephone bill / Gas Connection bill
  6. NOC from the owner of the premise

Timeline – How long does it take to register a Sole Proprietorship firm in India

Based on the nature of statutory registration (like GST, MSME, etc) it normally takes anywhere between 5-10 working days. However, this timeline is further subject to Government processing, approval time, public holidays, etc.

Sole Proprietorship Registration Fees / Cost in India

In general, there are no specific fees or cost to be paid for starting a sole proprietorship business on your own. Rather the cost depends on other registration you would need to apply, for e.g, MSME registration would cost you Rs. 1,000, GST registration would cost you Rs. 2,000.

Feel free to get in touch with us. Our Business Expert will guide you with the proper form of entity, suitable for your needs.