When a business is owned and governed by one person, it is called a sole proprietorship
company. This type of business can be incorporated in fifteen days and hence makes it one of the most
popular types of business to begin in the unsystematic sector, specifically among merchants and small
traders. 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.
- EASE OF SETUP:-
The entrepreneur can start operations and receive payments from clients as no registrations are
required to start a proprietorship.
- EASE OF COMPLIANCE:-The other advantage of a Proprietorship is that it requires no
additional compliance in most cases. The PAN of the proprietor and proprietorship are one and the
same. Hence in most cases, only income tax return in Form ITR-3 must be filed every year.
- EASE OF DISSOLUTION:-The proprietor does not have to particularly wind up the
company in case he wants to cease operations. This saves a lot of time and effort.
- MINIMUM COMPLIANCE:-Sole proprietorship have minimum compliance requirements.
Therefore, their agreements are confined to yearly filings for service, sales or professional taxes.
- SIMPLE TO BEGIN:- Sole proprietorship is simple to begin and can be set up in 15
days with the help of PAN card. One needs to simply have a GST Registration in place.
- ECONOMICAL:-Sole proprietorship is economical due to its minimum compliance
requirements, including no requirement of hiring an auditor.
- LIABILITY PROTECTION:-
A sole proprietorship does not provide the proprietor with limited liability protection. So the
proprietor would be held personally liable in case of any loss or liability.
- TRANSFERABILITY:-Any license or registration obtained in the name of the
proprietorship cannot be transferred to any other person or entity.
- LIFESPAN:-The existence of the sole proprietorship is tied to the proprietor hence
it would cease to exist with the proprietor.
- FUNDRAISING:-A proprietorship cannot raise equity funds from angel investors,
venture capital firms or PE funds. Banks also tend to restrictions on the amount of credit they can
Due to the disadvantages mentioned above, this registration will be suitable
only for small businesses and the unorganised sector with a limited period of existence.
Checklist Items for a Sole Proprietorship Registration:-
- A certificate/license issued by Municipal authorities under the Shop & Establishment Act.
- The license issued by Registering authorities like the Certificate of Practice is issued by the
Institute of Chartered Accountants of India.
- The registration/licensing document is 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 of the bank account etc,
- Complete Income Tax return (not just the acknowledgement) 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 electricity, water, and the landline telephone bills in the name of the
- Issue of GST Registration/Certificate.
Each proprietorship differs in terms of the functions, clientele and the mode of operations. Hence, a
couple of the registrations mentioned below will be applicable.
- MSME REGISTRATION:-
MSME or Udyog Aadhaar registration can be obtained in the name of the business to establish that the sole proprietorship is registered with the Ministry of Micro, Small and Medium Enterprises
- TAN REGISTRATION:-TAN registration must be obtained for the proprietor from the income tax department if the proprietor is making salary payments wherein TDS deduction is required.
- GST REGISTRATION:-GST registration must be obtained if the proprietor is selling goods or services that cross the GST turnover threshold limit for registration. In most states, GST registration is required for service providers having annual revenue of more than Rs.20 lakhs and in case of traders - annual revenue of more than Rs.40 lakhs.
- IMPORT EXPORT CODE:-Import Export Code or IE code can be obtained from the DGFT in the name of the business - in case of a proprietorship business undertaking export and/or import of goods into India.
- FSSAI REGISTRATION:- In case the proprietorship is involved in the selling of food products or handling of food products, FSSAI registration must be obtained from the Food Safety and Standard Authority of India in the name of the proprietor.
- CURRENT ACCOUNT:-A current account can be opened for a sole proprietorship through Taxcellence from various banks in India. Taxcellence offers exclusive partnerships through which zero-balance current accounts can be opened. It is recommended that GST registration be obtained for the same.
Our Sole Proprietorship Registration Procedure:-
- PROFESSIONAL GUIDANCE:-
Our Chartered Accountants give you professional guidance on many of the processes involved in registering your business as a sole proprietorship, along with registration of import/export code, GST and professional tax.
- 15 BUSINESS DAYS:-
Our team will offer full assistance with the registration process. This could vary between 5 and 15 days, depending on the task at hand for the authorities involved.
Documents Required For Registering A Sole Proprietorship
To start a Sole Proprietorship, the following documents are required:-
- Address and identity proof
- PAN card, KYC documents and
- Rental agreement or sale deed (in case of Shops & Establishment Act Registration).
What Are The Documents Required For Opening A Current Account?
To open a current account, the following documents are required:-
- Proof of the existence of your business
- Shops & Establishments Act Registration
- PAN card
- Address and Identity proof