[ecis2016.org] Proprietorship is ideal for small firms with fewer than five employees.
In India, sole proprietorship is among the earliest and easiest business structures to establish. A proprietorship is a business in which the proprietor owns, manages and controls the whole operation. Because the proprietorship and proprietor are the same, it is relatively simple to start and has very few compliance obligations.
You are reading: Proprietorship: Meaning, advantages, disadvantages and registration
A sole proprietorship cannot have additional partners or stockholders because the proprietor and the business are the same. Furthermore, there is no limited liability coverage for the proprietor from the sole proprietorship’s business activity. As a result, this sort of corporate structure is ideal for small firms with fewer than five employees.
A sole proprietorship firm is not taxable as a separate legal entity in India. Alternatively, business owners include their business taxes in their personal tax forms. A sole proprietor’s business income is added to his earnings after reducing expenses of the business, tax deductions, as well as other related income from the gross revenues.
A business, like every individual assessee, is entitled to an income tax deduction. The amount will be deducted in accordance with current IT rules and the slab rates relevant to his taxable income. In contrast, income taxes for limited firms are assessed on a flat rate basis.
Is it easy to form a sole proprietorship in India?
In India, establishing a sole proprietorship is a simple process. Before you consider how to start a proprietorship business in India, you should consider the following:
- Choose a suitable business name.
- Choose one convenient site as the designated location of practising your business.
- Start a current account in the name of your firm with any bank.
Sole Proprietorship: Documents required for registration
The four requirements for starting a business are as follows:
- PAN card
Read also : Everything about ready reckoner rate Pune
The proprietorship business’s PAN card is in their name. The single proprietorship business does not receive a firm PAN card since it does not have an independent legal status like a company.
- Aadhaar card
Aadhaar card is necessary for applying for any registration in India.
- Bank account
The sole owner must create a current account in a bank in the name of his or her sole proprietorship business. This account should be used for all proprietorship business operations.
To start a sole proprietorship current account, you must provide evidence of sole proprietorship business and evidence of registered office address. A GST registration, MSME registration, or a Shops and Establishment Act Licence serves as documentation of the sole proprietorship firm’s existence.
If you do not have such documents, you can send any licence/certificate granted for your sole proprietorship, such as a labour licence, mandi licence, police department permission/licence, sales tax certification, state/central pollution control board permission to run document, gram panchayat certificate, importer-exporter code certificate, TAN/TIN certificate, and so on.
- Proof of registered office (rent agreement or property documents)
You can lease a space for your e-commerce/online form to use as a workplace. Your registered office address proof will be the lease contract and NOC from the owner for conducting your sole proprietorship business. If you run your online/e-commerce business from home, your residential address proof or your electricity bill will be the registered office address proof, as will delivery/dispatch invoices of products or services issued to your clients mentioning your home address.
If you rent your home, you must produce the rental agreement and a letter of authorization from the owner to operate your business from home as proof of your office address.
Sole Proprietorship: Benefits
- This business can be easily started by only one person with adherence to minimal compliances.
- The sole proprietorship business is less expensive as compared to LLP or a company.
- Sole proprietors have complete control over their business and its running.
- Since only one person is involved in the business, the decisions can be made easily.
Sole Proprietorship: Disadvantages
- The sole proprietor has unlimited liability.
- Since there are no other people involved, the business might come to an end if anything happens to the sole proprietor.
- It’s complex to raise capital for the business.
Sole Proprietorship: Registration
Read also : All you need to know about Himachal Pradesh RERA
The entire process usually takes 10 days, but it is subject to departmental procedures.
SME registration
The MSME Act allows you to register as a Small and Medium Enterprise (SME). The request can be submitted online. Although registration as an SME is not required, it is highly useful, especially when applying for a business loan. The government operates several initiatives for SMEs in which loans are granted at a low interest rate.
Licence under the Shop and Establishment Act
According to local rules, firms must acquire the Shops and Establishment Act Licence. It is based on the size of the firm and the number of personnel. In general, all sole proprietors who run a business or open a commercial facility are required to obtain this licence.
Registration for GST
If your overall earnings or turnover exceeds Rs 40 lakh in a single fiscal year, you must register for GST. Firms enrolled in special category states, on the other hand, must seek GST registration if the threshold limit exceeds Rs 20 lakh. Regardless of turnover, any e-commerce vendor on an e-commerce aggregation portal like Flipkart or Amazon must have a GST registration. Any individual or corporation considering starting their own e-commerce business must obtain a GST Registration.
The following documents are required for GST registration:
- The proprietor’s PAN card, photo, and Aadhaar Card
- Proof of business location (utility bill/rent agreement)
- Copy of a bank statement (first page for verifying bank account number, address and IFSC code)
GST registration is simple and can be completed using the GST portal. Usually, the GST number is issued within 3-4 days of the application being submitted.
Sole Proprietorship: Compliances
It is mandatory to file income tax, TDS and GST returns annually.
Source: https://ecis2016.org/.
Copyright belongs to: ecis2016.org
Source: https://ecis2016.org
Category: Must Knows
