Sole Proprietorship Registration in India – Procedure & Advantages

A Sole Proprietorship form of business is managed by a single person. It does not require any registration as such, but to legally start a business, government proofs are required by banks. Any individual who wants to start a business with less investment can choose this type of business form.

All losses are borne by the owner, and he enjoys all the profits too. The business is controlled by the owner, and he/she can appoint someone else for conducting the business. In that case as well, ownership will solely lie with the owner.

Many local businesses such as grocery stores, parlours, boutiques, retail stores, etc., can be established as a sole proprietorship firm. Even small traders and manufacturers can establish a sole proprietorship firm

Advantages of Sole Proprietorship

Less compliances

Just one person can easily start a sole proprietorship business, as there is minimum compliance and it is relatively economic than LLP or company.

Control of the business

The sole proprietor will have complete control over the business, and it is easier to maintain secrecy.

Quick decision making

The sole proprietor is the sole decision maker of the business, and as they are taken by 1 person, it is quick and easier.

Disadvantages of Sole Proprietorship

Unlimited liability

There is an unlimited liability on the sole proprietor. He is personally liable for all the transactions he enters in the business. If any loss occurs, he will have to bear the whole loss out of his personal estate.

No perpetual succession

There is no perpetual succession which means it can come to an end if something happens to the sole person taking care of the business. It can shut down at any time. This makes the business unreliable and difficult to gain public trust for entering into agreements or contracts to expand the business.

Difficult to raise funds

Since a single person manages the business, it is not easy to raise capital. The capital of the business is from the investments put in by the sole proprietor. The sole proprietorship firm has no separate legal entity status from the owner. As it can come to an end at any time and there is no separate entity, it is difficult to obtain funds from third parties.

Documents Required for Sole Proprietorship

The documents required for registration of Sole Proprietorship are-

  1. Aadhaar Card.
  2. PAN Card.
  3. Registered Office proof.
  4. Bank Account.

Checklist required for Sole Proprietorship

  1. PAN Card of the proprietor.
  2. Name and address of the business.
  3. Bank Account in the name of the business.
  4. Registration under the Shop and Establishment Act of the respective state.
  5. Registration under GST, if the business turnover exceeds Rs.20/40 lakhs.

What are the Compliances required?

As a sole proprietor, you must file Income Tax Return annually. Also, you need to file your GST Return if you are registered under GST. A sole proprietor should also deduct TDS and file TDS return if liable for Tax Audit.

Timelines for Sole Proprietorship Registration

The Sole Proprietorship requires opening a bank account in the name of the business, a Certificate of Registration under the Shop and Establishment Act of the respective state and GST Registration. The registration process takes approximately 10 days, subject to departmental approval and reverts from the respective department.

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