A sole proprietor is the sole owner of the proprietorship business. Hence, a business will be carried forward by making new bank account for the business and GST registration will be done by using PAN and Aadhar of the proprietor. The proprietor is completely responsible for all the assets and liabilities of the business.
It was a smooth process, all of the team were cooperative and completed my work within a time frame.
Heera
A sole proprietorship form of business is a common business structure in India. A sole proprietorship business is established and managed by a single person. This type of business form is best suitable for individuals wishing to start a business with less investment. Generally, it does not require any registration as such
In India, we don’t have to register sole proprietorship. Hence, there is no platform to check the status of a sole proprietorship. However, if a proprietor has applied for GST registration, the GST registration and filing status of the proprietorship can be checked on the GST Portal to confirm the existence of the proprietorship.
There is no separate recognition of proprietorship as a separate legal entity. Hence, the business owner and the proprietorship are considered one and the same for all legal and official purposes.
To run a proprietorship business in India, the proprietor will have to obtain PAN and Aadhar. The proprietor must obtain GST registration, UDYAM registration and open a bank current account. In some states, the proprietor will also have to obtain Shops & Establishment Act registration.
In addition to the basic requirements above, additional licence and permits may be required depending on the industry, state, and local regulations.
Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process – as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.
Lower compliance: As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.
Simplicity: As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.
Business decision: In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.
Complete control: As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.
Disadvantages of Sole Proprietorship
Funding: This type of business structure relies solely on one persons savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible – as this type of business entity does not allow for profit sharing or shareholding.
Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship – the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure – the proprietor will be held personally liable until all the liabilities are extinguished.
Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.
Growth: A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.
Unincorporated business: Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.
Proprietorship Business Activities
A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defence, telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, proprietorship business structure only works for business activities that are small scale in nature.
Compliances for Proprietorship
The following are some of the compliances that are applicable for a sole proprietorship:
Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.
Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.
GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.
TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold – tax must be deducted at source and TDS returns must be filed every quarter.
In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.
faqs
A proprietorship firm is a type of business structure where a single individual owns and manages the entire business. The proprietor is personally liable for all the debts and obligations of the firm. Proprietorship firms are easy to set up and operate, making them a popular choice for small businesses and startups in India.
There are mainly four types of proprietorship in India:
Each type of proprietorship has its advantages and disadvantages, and the choice of business structure depends on the proprietor’s needs, goals, and resources.
Proprietorship and firm are often used interchangeably, but there is a subtle difference between the two. Proprietorship refers to a type of business structure where a single individual owns and manages the entire business, while a firm refers to a group of individuals who come together to carry out a business activity. In a firm, the ownership is shared among the partners, and the profits and losses are also shared among them. In contrast, in proprietorship, the proprietor has complete control over the business, and all the profits and losses belong to the proprietor alone.
No, there is no certificate of Incorporation given.
As the sole proprietorship and the proprietor are the same the individual has to just file the Income-tax returns and GST returns filing for the proprietorship firm.
No, there is no minimum requirement to start a sole proprietorship in India.
The sole proprietorships exist as long as the proprietor is alive and is desiring to run the business.
Yes, a sole proprietor is considered to be the same as the sole proprietor.
It generally differs from state to state as in Maharashtra a Shop and Act license is required and for West Bengal, the trade license is required.
The proprietor owns, controls, and manages the sole proprietorships. He has a complete hold over the proprietorship.
No, PAN card cannot be obtain for proprietorship. Proprietorship PAN card will be the same as proprietor PAN card. There is no separate PAN card for proprietorship business.
Yes, proprietorship current account can be opened in the name of the business. However, for all legal and official purposes – the PAN card of the proprietor will be used. Hence, the ultimate owner and operator of the proprietorship bank account will be the proprietor.
Yes, you can operate a proprietorship business from your house as long as it complies with other regulations that maybe applicable for your business.
Any official document that has the name of the proprietor, photo and address like driving license or passport can be used as address proof for proprietorship. In addition to the above, a utility or EB bill in name of proprietor can also be submitted.
The licenses and registrations for a sole proprietorship will vary depending on the type of business activity.
No, GST registration is not mandatory for proprietorship. However, it is recommended that all proprietorship be registered under GST and have UDYAM registration to undertake various business activities
Proprietorships in India are a type of unregistered business entity that is owned, managed, and controlled by one person. The micro and the small businesses that are operating in the unorganized sector prefer getting registered as Sole proprietorships.
An Indian Citizen with a current account in the name of his/her business can get a sole proprietorship registration.
It takes around 8 to 10 days but is subject to government processing and document submission.
