Sole Proprietorship Registration

A proprietorship is the most popular form of business formation in India and is used by most micro and small businesses. It is widely used due to its simple installation, cheap price and easy operation. Most single Entrepreneurs want to register as a sole proprietor in India because it gets their business up and running quickly.

But it has one big drawback: The owner is personally on the hook for all debts and loses. That means personal and business assets are on the line. Having a certificate of incorporation may help in establishing credibility but in general, proprietorships are not recommended for medium or large businesses because of disadvantages such as unlimited liability, lack of separate legal entity, non-transferability and limited existence.

How to Register a Proprietorship Firm in India?

There is no exclusive law or government agency that registers sole proprietorship in India. Instead, this is known by the tax registrations and licenses that show the business is real.

GST Registration under the name of the proprietorship business is the most widely used way of proving the existence in business of proprietorship.

Sole Proprietorship v/s Other Types of Business Entities

If you want to register a Sole Proprietorship, the set-up of your business is not the same as other entities. Here’s how it stands apart:

No Regulatory Authority

There is no board of directors or shareholders as in the case of companies, and no managing committee as in the case of limited liability partnership firms.

No Annual Compliance

Other than filing the income tax return, proprietorships do not have to worry about the fulfilment of annual compliance as compared to the other entity types.

No Guidance or Framework

There is no regulatory body. There are not really any rules or clearly defined structures. The owner is the sole sender of anybody and anything.

No MOA or Legal Agreement

MOA(provided account is the list of activities, and both (Company, LLP) have the MOA/Agreement. A proprietorship is not in need of such a piece of paper.

No Proprietorship Certificate

No “proprietorship certificate” is an official document in India. On the other hand holding a bank account in the name of the firm amount to proof of ownership.

No Restrictions on Business Name

A sole proprietorship can be conducted under absolutely any business name including the owner’s full nomenclature. There is no need to formally accept the name.

Advantages of Registration for a Sole Proprietorship Firm

So why might so many small businesses think it’s preferable to be a proprietor?

1 – Simple Setup

No incorporation process – only some licenses and registration such as GST, UDYAM, Shop Act license.

2 – Minimal Regulations

Simply lodge tax returns (as well as any GST returns you may need to) to remain in good standing.

3 – Easy to Manage

It is easy being a one-owner and operator business!

4 – Full Control & Freedom

There are no partners or directors standing in your way of making decisions.

Disadvantages of Proprietorship Registration in India

The following are the disadvantages of proprietorship registration in India:

It’s simple to establish, but there are some drawbacks you’ll want to be aware of:

1 – Limited Capital

Fundraising is challenging, as the owner relies on personal finance.

2 – Unlimited Liability

The owner is personally liable for all debts — his business’s failure can impact his personal assets.

3 – No Continuity

The biz is over when its owner leaves it, retires or dies.

4 – Limited Growth Scope

No room for growth since it is all about one person.

5 – Higher Taxation

Profits from a business are taxed as personal income, and they don’t get any special rebates.

6 – Limited Resources

Owner-run businesses also generally never grow beyond a certain point, as there is only so much one person can do without lending a hand elsewhere.?

Eligibility Requirements for Sole Proprietorship in India

As proprietorship is not an entity distinct from its owner, there are no hard and fast rules. But you’ll have to meet a few conditions:

1 – Must be an Indian citizen & taxpayer – Only Indian citizens running local businesses are eligible to establish proprietorships.

2 – GST Registration – Compulsory for turnover over ₹40 lakh (goods) and ₹20 lakh (services).

3 – Business Account: It is mandatory to have a bank account in the business name, and this is for financial transactions and also serves as proprietorship proof.

Sole Proprietorship Registration Documents Needed

You’ll need the following documents:

1. Aadhaar Card & PAN Card – Both are mandatory; linking of both is compulsory for tax filing.
2. Banking Information papers – Aadhaar, PAN, ID proof and Address Proof.
3. Office Address Proof – Rent agreement & NOC if rented, Utility bill if owned.

Additional Registrations (if applicable):

1. UDYAM Registration – For MSME registration and to get the benefits of government schemes.
2. GST Registration – Compulsory beyond the limit of turnover specified.
3. Shop and Establishment License – Mandated by the state if employing staff.

Procedure for Registration for Sole Proprietorship in India

Here’s how to get started:

1. Choose a business name.
2. Ensure the name is unique
3. Apply online for GST registration.
4. Submit the necessary documents.
5. Get the GST certificate (a few days with you).
6. Establish a bank account in the firm’s name.

Note: There is no such thing as an “online” “proprietorship registration” in India. It is documented for tax registrations and permits.

How can we help you Register Your Sole Proprietorship?

At GarudaMudra, we offer end-to-end support in establishing a sole proprietor. Our services include:

1. Collecting required documents & details.
2. Drafting and filing applications.
3. Checking and correcting mistakes (if they exist).
4. Obtaining the GST registration certificate.
5. Help with Shop & Establishment registration.

GarudaMudra, an end-to-end business registration service provider, is your ideal partner. We help you launch your proprietary product without any hurdles and complications.