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Proprietorship Registration

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Proprietorship Registration

Sole proprietorship is one of the oldest and easiest Business Structure to start in India. A proprietorship is a type of business that is owned, managed, and controlled by one person – who is the proprietor. As the proprietorship and proprietor are one and the same, it is very easy to start and there are very minimal compliance requirements.

As the proprietor and the business are one and the same, a proprietorship cannot have other partners or shareholders. Further, there is no limited liability protection for the proprietor from the business activities conducted in the sole proprietorship. Hence, this type of business entity is best suited for every small businesses with no more than 5 employees.

Unilex can assist you in registering a Sole Proprietorship, a simple and efficient business structure that is ideal for solo entrepreneurs. With our expert guidance and streamlined process, you can start your proprietorship firm registration online quickly and hassle-free. Start your Sole Proprietorship registration with us and unlock the potential of your business ideas.

Table of Content

What is a Proprietorship Registration?
Advantages of Proprietorship Registration
Minimum Requirements for incorporation
Process of Proprietorship Registration

Advantages of Proprietorship

Easy registration – Sole proprietorship does not have any formal incorporation or dissolution process – as its the same as the Proprietor.
Lower compliance – As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower.
Simplicity – As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements.
Business decision – In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person.

Documents for Proprietorship Registration

PAN

Aadhar

Address Proof

Process of registering proprietorship firm

Essential Licenses and Registrations for Proprietorships

To run a proprietorship in India, you need important licenses and registrations, including:
Get a Permanent Account Number (PAN) for your business identification.
Register under UDYAM, which recognizes your business as a Micro, Small, or Medium Enterprise (MSME) and offers government benefits.
If your business exceeds specific thresholds, you must register for Goods and Services Tax (GST) to collect and pay GST.
Open a separate bank account for your business to manage finances smoothly.
Depending on your business location, register under your state’s Shops and Establishment Act to follow local labor regulations.

Disadvantages of Sole Proprietorship

Funding: This type of business structure relies solely on one persons savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible – as this type of business entity does not allow for profit sharing or shareholding.

Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship – the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure – the proprietor will be held personally liable until all the liabilities are extinguished.

Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.

Growth: A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.

Unincorporated business: Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.

What to expect from proprietorship firm registration

Proprietorship Business Activities

A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defence, telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, proprietorship business structure only works for business activities that are small scale in nature.

Compliances for Proprietorship

The following are some of the compliances that are applicable for a sole proprietorship registration:

Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.

Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.

GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.

TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold – tax must be deducted at source and TDS returns must be filed every quarter.

In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.

FAQ

Frequently Asked Questions

A proprietorship firm is a type of business structure where a single individual owns and manages the entire business. The proprietor is personally liable for all the debts and obligations of the firm. Proprietorship firms are easy to set up and operate, making them a popular choice for small businesses and startups in India.

There are mainly four types of proprietorship in India:
Sole Proprietorship
One Person Company (OPC)
Registered Proprietorship
Unregistered Proprietorship

Proprietorship and firm are often used interchangeably, but there is a subtle difference between the two. Proprietorship refers to a type of business structure where a single individual owns and manages the entire business, while a firm refers to a group of individuals who come together to carry out a business activity. In a firm, the ownership is shared among the partners, and the profits and losses are also shared among them. In contrast, in proprietorship, the proprietor has complete control over the business, and all the profits and losses belong to the proprietor alone.

No, there is no certificate of Incorporation given.

As the sole proprietorship and the proprietor are the same the individual has to just file the Income-tax returns and GST returns filing for the proprietorship firm.

No, there is no minimum requirement to start a sole proprietorship in India.

The sole proprietorships exist as long as the proprietor is alive and is desiring to run the business.

Yes, a sole proprietor is considered to be the same as the sole proprietor.

It generally differs from state to state as in Maharashtra a Shop and Act license is required and for West Bengal, the trade license is required.

The proprietor owns, controls, and manages the sole proprietorships. He has a complete hold over the proprietorship.

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