Sole Proprietorship

What is a Sole Proprietorship?

Sole Proprietorship registration in India is for one owner business. Sole proprietors manage profits and income tax under their own names or a trade name. It’s a common choice for small businesses and individual entrepreneurs.

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.

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 code (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 online (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 proprietary concern,
• Issue of GST Registration/Certificate.

Compliances Required For Sole Proprietorship Firm

Some of the compliances that apply to a sole proprietorship include the following:

• Income Tax Return Filing: The proprietorship’s business owner must submit a personal income tax return using form ITR-3 or ITR-4
• Business Income: Only the ITR-3 and ITR-4 income tax forms allow for the declaration of business income. As a result, in order to comply with income tax requirements, all proprietorships must submit forms ITR-3 or ITR-4
• GST Return Filing: If a proprietorship is registered for GST, a filing GST return each month and every three months in accordance with the business’s registration plan
• TDS Returns: Tax must be withheld at source and TDS returns must be filed quarterly if the proprietorship has employees or spends more than a specific amount on goods and services.

In addition to the mentioned points, the proprietorship may also need to comply with additional regulations according to its industry and region.

A Sole Proprietorship Registration Procedure?

Professional Guidance

Our experts give you professional guidance on many of the processes involved in registering your business as a sole proprietorship, along with registration of service tax, sales tax, import/export code, and professional tax.

Vendor Relationship

Our team will connect you with an established vendor who will book your application and also keep you updated on its status and progress. The vendors we have onboard are well-accomplished and skillful in managing native registrations.

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.

How to Check Proprietorship Status?

To check the proprietorship status, you can follow these steps:
1. Go to the Ministry of Corporate Affairs (MCA) website.
2. Click on the ‘MCA Services’ tab.
3. In the ‘Master Data’ section, click on ‘Company/LLP Master Data’.
4. Enter the proprietorship’s CIN (Corporate Identification Number) or name in the search bar.
5. Click on the ‘Search’ button.

The MCA website will display the proprietorship’s registration status and other details, such as the proprietor’s name, address, and registration date.

If you do not know the proprietorship’s CIN, you can still check its status by entering its name in the search bar. However, this will only return a list of proprietorships with the same name. You will need to contact the MCA or a GST practitioner to get the exact CIN of the proprietorship.

Here are some of the possible statuses that you may see for a proprietorship:

• Active: The proprietorship is registered and is currently in operation.
• Inactive: The proprietorship is registered but is not currently in operation.
• Suspended: The proprietorship’s registration has been suspended by the MCA.
• Cancelled: The proprietorship’s registration has been cancelled by the MCA.

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

Benefits of Sole Proprietorship Firm

Sole proprietorship is a popular form of business in which an individual owns and operates a business. Some of the benefits of a sole proprietorship firm are:

Easy to Set Up

Sole proprietorship firms are easy to set up and operate. There are no formalities to be followed for setting up a sole proprietorship firm, which makes it a popular choice among small business owners.

Full Control

The owner of a sole proprietorship firm has full control over the business. They are free to make decisions without any interference from others.

No Separate Legal Entity

A sole proprietorship firm does not have a separate legal entity from its owner. This means that the owner is personally liable for all the debts and obligations of the business.

Tax Benefits

Sole proprietorship firms are taxed as individual taxpayers, which means that the owner can claim deductions for business expenses and losses on their personal income tax return.

Minimal Compliance Requirements

Sole proprietorship firms have minimal compliance requirements compared to other forms of businesses. They are not required to maintain any formal records or hold annual meetings.

Flexibility

Sole proprietorship firms offer great flexibility to the owner in terms of operations, management, and decision making.

Low Cost

Sole proprietorship firms are cost-effective to operate as they do not have to pay for legal fees or comply with complex regulatory requirements.

Overall, a sole proprietorship firm is an ideal option for small businesses with minimal capital and limited liability.

Compliances for Proprietorship

The compliances for a proprietorship business in India are as follows:

• Income tax: Proprietors are required to file income tax returns every year, if their total income exceeds ₹ 2.5 lakhs (for individuals below the age of 60 years) or ₹3 lakhs (for individuals above the age of 60 years).
• GST: Proprietorships with a turnover of more than ₹ 20 lakhs are required to register under GST. They are required to file monthly and annual returns, and collect and remit GST on their supplies.
• Shop and Establishment Act: Proprietorships that have employees are required to register under the Shop and Establishment Act of the respective state. This Act regulates the working conditions of employees, such as the hours of work, wages, and leave.
• Professional tax: Proprietors who are engaged in certain professions, such as lawyers, doctors, and chartered accountants, are required to pay professional tax. The rates of professional tax vary from state to state.
• Trade license: Proprietorships that operate from a physical location are required to obtain a trade license from the local authority. The requirements for obtaining a trade license vary from city to city.
• Other compliances: There are a number of other compliances that may apply to proprietorships, such as environmental regulations, labour laws, and pollution control laws. The specific compliances that apply will vary depending on the nature of the business.

Proprietorship Vs Limited Liability Partnership (LLP) Vs Company

Timelines for Sole Proprietorship Registration

The timelines for sole proprietorship registration in India can vary depending on the state and the method of registration. However, in general, the registration process can be completed within 1-2 weeks.

Here are the general steps involved in registering a sole proprietorship in India:

1.Choose a name for your business. The name must be unique and cannot be already registered by another business.

2.Obtain a Digital Signature Certificate (DSC). A DSC is a secure digital key that is used to sign electronic documents. It is mandatory for businesses to obtain a DSC before registering their business with the Registrar of Companies (ROC).

3.Prepare the registration documents. The registration documents will vary from state to state. However, they will typically include the following:

4.Submit the registration documents to the ROC. The ROC will review the documents and approve the registration of your business.

5.Obtain a trade license from the local authority. If you are operating from a physical location, you will need to obtain a trade license from the local authority. The requirements for obtaining a trade license vary from city to city.

Once your business is registered, you will be required to comply with a number of laws and regulations, such as income tax, GST, and the Shop and Establishment Act.