Overview of Sole Proprietorship Registration

After registration of a Proprietorship firm in India, you gain access to the following perks:

Easy Registration Process

As there is no particular Regulatory Authority, one can take a different approach for registering a sole proprietorship firm in India. The steps are pretty simple, and they all involve submitting an offline application to the regional office.

Lack of Regulatory Requirements

Due to the lack of oversight, there are not many regulatory requirements that one needs to follow. One must require to fill out your income tax returns each year and GST returns as per the compliances of the business.

Easier Business Maintenance

A Sole proprietorship is very easy to manage as a single-owner runs the business. There are not many components required to be considered. In several cases, only small shops go for sole proprietorship registration. And thus, other than taking care of some backend finances, there is not much infrastructure one needs to bother with.

Freedom in Business Conduct

As one can start sole proprietorship business solo, then they are free to conduct the business in the way they want. Consider a sole proprietor as a lone ranger in the business entities he can conduct his business with less regulations and compliances.

Sole Proprietorship Firm v/s Other Business Entities

When one applies for a sole Proprietorship registration, the idea of a business entity differs from the rest of the other entities. Sole Proprietor is not looking for any robust structure; instead, they are looking for a freer way to conduct Business. The sole proprietorship registration is very different from other business entities in India:

No Regulatory Authority

Unlike most business registrations in India, sole Proprietorship has no regulatory authority. There is nobody other than the standard income tax department watching over those with the Sole Proprietorship license.

No Annual Compliances requirement

One business established as a Sole proprietorship then there is no need for Annual Compliance. Simply yearly income tax returns required to be filled. Hence, the monitoring of a Sole proprietorship becomes easy as compared to other entitles.

Single ownership

There is no as such regulatory authority; therefore not many rules are required to be followed. One can learn everything about the business independently although this is very different case in partnership firm or a limited liability company.

No Agreement to dictate the Business Activity

There is no such requirement of memorandum of association for sole Proprietorship business. Traditionally, a Memorandum of Association is the core document which states the purpose of the Business. While some legal document required during sole proprietorship registration stating the nature of business, it is not as robust as a Memorandum of Association or an LLP Agreement.

No Proprietorship Certification requirement

A sole proprietorship registration certificate in India does not exist. Furthermore, there is no such existence of any proper sole proprietorship registration either. All one need is a bank account in the name of the business entity, which will act as prove that it is a registered sole proprietorship firm which is not in case of other entities

No Restrictions on Proprietorship Firm's nomenclature

There is no such concept of firm name registration. Although company or partnership firm requires a proper name in order to start a business. In sole proprietorship business one can provide any name by the choice to their entity. As there are lacks of restrictions, hence benefits are more to register a sole proprietorship in India as compared to other entities.

Advantages of Sole Proprietorship Registration in India

Sole Proprietorship firms have several advantages for their owners. Some of the advantages are discussed in detail below:

Smooth Start

There is no elaborate registration process for the establishment of proprietorship firms. A proprietorship firm uses the owner’s legal identity. Due to this provision, there is no need to register the firm separately until it is necessary. This smooth registration process makes it easier for the owners to register their firms, which is beneficial.

Flexible Operational Strategies

Being the sole owner of a business, it is easier to understand and operate the same. The owner is the only decision-maker. Hence, the decision is made quicker and better for the company. One owner businesses have more straightforward operational functioning because there is the only person to create and implement plans for the business.

Undivided Profits

In proprietorship firms, there are no firm rules for the money earned by the business since there is only one owner of the company. The owner is the only person to accumulate the profits and further invest it in the market and other ventures. Sole ownership gets rid of the benefit related conflicts in the firm. Money comes in to facilitate and maintain the processes in the firm.

Taxation

Any sole proprietor is not entitled to pay income tax if the profits of the company are less than Rs. 2.5 lakh per year. This is a significant benefit for the firm to start small and save on taxes. However, it is essential to note that the firm has to pay income taxes once the profits exceed Rs. 2.5 lakh per annum.

Drawbacks of Sole Proprietorship Registration in India

If you want to incorporate a Sole Proprietorship, then it is also prudent to learn about its drawbacks.

Proprietor has Limited Capital

When registering a sole proprietorship firm, remember that handling all the business expenses by our own. And as an individual, raising funds would be difficult. It limits the Capital that a sole proprietorship firm can have access to.

Proprietor has Unlimited Liability

The sole Proprietorship has not any separate legal entity. Though sole proprietor and entity are two different then also the business is not separate from the sole proprietor as all business liabilities fall on the owner. This factor of unlimited liability removes any sense of security from the business. One cannot afford mistakes as they can mark the end of the business enterprise.

Proprietorship can't exist without its owner

It is not mandatory required to register a sole proprietorship business in case it is already set up business inherited by the legacy. Although the business entity cease to exist as soon as the owner leaves the proprietorship firm.

Little scope for Business Expansion

Running a sole Proprietorship business depends upon a single person, hence there is no diversifications when it comes to doing Business as a sole proprietor. A single person needs manpower to expand its business which becomes difficult in sole proprietorship.

No rebate on Income Tax Rates

Everything earned in the sole Proprietorship business will be taxed as the personal tax. Furthermore, being a sole proprietorship firm, the business entity won't get many government benefits such as employee health insurance and more.

Resource Limitations in a Proprietorship

There are lacks of resources in the sole proprietorship firm business because of the infrastructure. One cannot engage with complex enterprises as they have to stay within the capabilities.

Eligibility Criteria for Sole Proprietorship Registration in India

As Sole Proprietorship registered business is not treated as a legal business entity, so it has not given any particular criteria to start one. Thus to get sole proprietorship registration, one required to adhere to all the following criteria:

Applicant must be a tax-paying citizen

Online sole Proprietorship registration is for entities running a local business in India. The sole proprietorship business owner requires and deemed to pay taxes on the profit making accordingly. It is important that sole proprietorship business is registered in India itself for tax purposes and ultimately becomes proof for the business.

Applicant must obtain the GST registration for its Business

If the annual turnover of the sole proprietorship business is for more than Rs 40 Lakh, then the entity must require to obtain the GST registration certificate in India. It will become a proof for the business.

Register a Bank Account in Proprietorship's name

One criterion for sole proprietorship firm certification is to open a bank account in the name of the owner/sole Proprietor. It will help in conducting the business financial transactions properly.

The documents required for registering a proprietorship firm entail the attachments you need to get registrations to give your business identity. Thus, you will need the following things:

• Documents required for opening a bank account for Sole Proprietorship
• Documents required for GST registration for Sole Proprietorship
• Documents required to obtain a PAN card.
• Documents required for Shops and Establishment Registration

Documentation for opening a Bank Account

• Proof of name: Provide evidence of the name of your Proprietorship firm.
• Proof of Address: Provide details of the address details of the proprietorship firm
• Activity of concern: Provide the details about your business objective. You can either use an existing invoice or a detailed write-up.
• Provide other business registrations: Send the banks a copy of the registration certificates about your Business.
• ITR return: Copy of last year's income tax return
• Utility bills: Provide a copy of the utility bills to reinforce your address proof.

Documents required for GST registration

• Your PAN card
• Your AADHAR Card
• Your Photo Graph
• Your proof of Address
• Your Bank Account Details

Documents required for PAN Card

• Your AADHAR card
• Your photograph
• Sample of your signature

Documents required for Shops and Establishment Registration

• Utility Bill of the firm
• AADHAR Card
• VOTER ID Card
• PAN Card
• Your Photograph
• Details of your Business
• Architectural Blueprint of Your Business

Requirement for Sole Proprietorship Registration in India

The requirement for Sole Proprietorship registration in India is as follows:

• Choose the name of the Business
• Check if the chosen business name is unique
• File the online application for GST registration
• Upload the required documents
• Obtain GST registration certification a few days after filing the application
• Set up a bank account in the name of the Sole Proprietorship  

The procedure for registering a proprietorship firm is as follows;

Step 1: Give your business a name

Always choose a name for a business firm that expresses the nature of a business and is distinctive from others. Additionally, one must ensure that no other company is already using the name or intend to utilize.

Step 2: Registering an entity and opening a bank account

The next step is to create a current bank account in the entity’s name. However, since formal registration is not required, one can apply freely for additional government permits under the regulations that apply in particular line of work.

Step 3: MSME registration

An MSME (Small and Medium Enterprise) certification is not required, but it increases a company’s prospects of obtaining financing and provides assistance in other legal concerns. Getting written under the MSMED Act would enable to take advantage of government programs for such businesses. On the official MSME website, there is an online registration method available for MSME registration. The sole owners will find this approach to be straightforward and convenient.

Step 4: License under the Shop & Establishment Act

Not all single proprietorship businesses are required to have a Shop & Establishment Act license, although the majority of them do, under the regional regulations that govern the industry. The municipal party issues the assignment for shops and establishments. The quantity of employees in a corporation determines how many of these licenses are granted. Business owners must visit the individual state-specific website for registration as the registration process varies by state.

Step 5: Registration for the Tax on Goods and Services (GST)

Only if an organization’s yearly revenue exceeds ₹40 lakh or ₹20 lakh for companies operating in North-Eastern regions is registration for the Goods and Services Tax required. A GST-registered identity is crucial if a business owner wishes to sell goods online through e-commerce websites like Amazon, Flipkart, eBay, and others. It is essential to remember that single proprietorship businesses are not required to register for GST.

Step 6: Office Address Verification

For some processes necessary for the operation of the firm, a registered agent address evidence is required. The rental agreement and a NOC from the office’s landlord may be used to verify the office address if the office is in a rented space. If the business owner has an office, the municipal corporation’s power bill or any other business ownership documents might serve as confirmation of the office address.

In view of the above requirements, it is beneficial to avail support of an expert firm which can assure seamless delivery of the same without much hassle. That is what Startupfino is all about. Sole Proprietorship registration is the most common form of the business which is used in India. You can start and operate the business with minimum regulatory compliance. We provide access to reliable professionals and coordinate with them to fulfil all your legal requirements.