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Since it is not subject to any specific legislation, a sole proprietorship is the simplest form of business to operate in India. The compliance requirements for sole proprietorships are minimal and straightforward to meet. Having a sole proprietorship denotes that a business is run by a single individual. A single person makes all of the company’s decisions and manages it.

What is Sole Proprietorship

When a business is organised as a Sole Proprietorship, it is run by a single person. Registration isn’t necessary in most cases. This business form is ideal for anyone looking to start a business on a shoestring budget. The sole proprietor/owner has complete control over the company. This type of business can be started by a single person who has a small amount of money and wants to work from home or on a premises.

The owner of a sole proprietorship is responsible for making all of the financial investments for the business. He is responsible for all of the company’s losses and reaps all of its rewards. He oversees and manages the company. However, while he has the power to appoint people to run the business, he retains complete control.

Many small local businesses, such as grocers, salons, boutiques, and retail shops, can be started as a sole proprietorship firm. A sole proprietorship firm can be started by even the smallest of business owners or manufacturers.

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Documents required for the registration of a sole proprietorship

Aadhar card

India’s Aadhar card and Aadhar number are now required for almost every registration. A tax return can only be filed if the PAN card and Aadhar number are linked. If you do not yet have an Aadhar number, contact your local E-Mitra or Aadhar Seva Kendra. Within 15-20 days of submitting an Aadhar card application, the card is delivered to the registered address.

PAN card

If you don’t have a PAN, you can’t file your tax return. As a result, if you don’t already have one, get one as soon as possible. You can apply for a PAN card online for about Rs 110. A scanned photo, proof of identity, and proof of address are required for application.

Online submission of the form is possible with Aadhar e-KYC verification. It takes 7-8 days for the PAN number to be assigned after the PAN card application has been submitted and verified by the National Securities Depository Limited (NSDL). Additionally, the registered address receives a hard copy of the PAN card within 15-20 days.

Bank account

As soon as you have your Aadhar and PAN numbers, you can go to any bank and open an account. In addition to your Aadhar Number and PAN, you must have identification and proof of address with you at all times. To open a current account, you’ll also have to show the bank officials your GST registration document.

Proof of Registered Office

For rented properties, you’ll need the lease agreement and notice of completion (NOC) from the landlord.
If it’s a self-owned property, you’ll need to provide proof of residency, such as an electric bill.

A Sole Proprietorship Requires Registrations

There are a few other registrations necessary to prove the firm’s existence in addition to the ones listed above:

Become a SME Registrant

Under the MSME Act, you can register as a Small and Medium-Sized Enterprise (SME). Electronic submission of the application is possible. Even though it isn’t required, registering as a small or medium-sized enterprise (SME) has numerous advantages, especially when seeking financing for the business. To help small and medium-sized businesses, the government has implemented a number of programmes that offer low-interest loans.

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Licensing under the Shops and Establishments Act

This licence is not required everywhere, but it must be obtained in accordance with local laws in order to operate legally. Depending on the number of employees, the municipal corporation issues this currency.

Registration for the Goods and Services Tax (GST)

If your annual revenue exceeds Rs. 40 lakhs, you can register for GST. A GST number is also required if you do online business. The following documents are required for GST registration:

  • Aadhar Card, Photo ID, and Pan Card of the Business Owner
  • Proof of business place (electricity bill/ rent agreement)
  • Copy of a bank statement (first page for verifying bank account number, address and IFSC code)

The GST portal makes it simple to register for GST. Most applications receive a GST number within 3-4 days of submission.

Documents you’ll receive following the registration of your sole proprietorship

Your sole proprietorship business will receive the following documents after it is incorporated:

  • Certificate of GST Registration
  • License under the Shop and Establishment Act
  • MSME Certification (Small and Medium-Sized Enterprise Certification)

Fees for registering a sole proprietorship business

In India, the registration fee for a Sole Proprietorship Firm is Rs 1,999, which includes government and professional fees. The most expensive part is registering for things like GST, MSME, and other government mandates that are necessary for a proprietorship firm to exist.

Who is eligible to choose Sole Proprietorship?

Anyone looking to start a business on a shoestring budget has the option of going with a sole proprietorship. In a matter of 10-15 days, you’ll be able to get it going. Furthermore, you have total authority over the company’s direction.

Benefits of Operating as a Sole Proprietor

Fewer comliance requirements

One person can easily start a sole proprietorship business. In order to incorporate something, a certain level of compliance must be met. This business structure is more cost-effective than a corporation or limited liability partnership because it requires less capital to get off the ground.

Having command of a company

The business will be entirely under the control of the sole owner. He’ll be in charge of every facet of the company. Because the company is run by a single person, privacy is assured.

Decision-making in a flash

The business’s sole proprietor makes all of the decisions. One person makes all of the decisions. In other words, decisions can be made quickly and without consulting anyone else.

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Cons of Operating as a Sole Proprietor

Limitless amount of responsibility

The sole proprietor has unbounded legal responsibility. All of his business dealings are subject to his personal liability. Should there be a loss, he will be responsible for paying it out of his own pocket.

There will be no endless succession of events

There is no perpetual succession, so if the sole person in charge of the business dies, the company will come to an end. It has the capability to go offline at any time. As a result, the company loses public trust and is less likely to enter into agreements or contracts that will help it grow.

Raising money is a challenge

Due to the fact that the company is run by a single individual, raising capital is difficult. The sole proprietor’s investments are the source of the company’s funds. No separate legal status exists for the sole proprietorship firm from the owner. It’s difficult to get money from third parties because it can end at any time and isn’t a separate entity.

To-do list for sole proprietorship

  • The proprietor’s PAN card.
  • The company’s name and address are required fields.
  • Open a business-specific bank account.
  • Registration in accordance with the state’s Shop and Establishment Act.
  • If a company’s annual revenue exceeds Rs.20 lakh, it must register under the GST regime.

What are the requirements in terms of Compliance?

You must file an annual Income Tax Return if you are a sole proprietor. If you’re GST-registered, you’ll also have to file a GST Return. If a sole proprietor is subject to a Tax Audit, he or she should deduct TDS and file a TDS return.

Timetable for registering as an individual proprietorship

A sole proprietorship necessitates the opening of a business bank account, registration under the state’s Shop and Establishment Act, and GST registration. Approval from the relevant department is required, and registration takes about 10 days after that.

Frequently Asked Questions (FAQs)

How do I register my business as a sole proprietor?

GST registration allows you to set up your company as a sole proprietorship. MSME registrations, Shop & License License registrations, and so on are optional extras that can be beneficial to your business.

Sole proprietorship necessitates a GST number?

Yes, in order to prove the existence of a sole proprietorship firm, one must obtain GST registration.

A Sole Proprietorship firm can be registered in as little as one day?

The registration of a sole proprietorship firm in India takes, on average, 7-10 working days after document verification by the relevant authorities.