Launch, oversee, and run your own business with a Sole Proprietorship registration!
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Launch, oversee, and run your own business with a Sole Proprietorship registration!
Most businesses in India start individually without other’s participation. An individual carrying out business activities is the sole proprietor and its business entity is said to be a Proprietorship Firm. The identity of an individual and the business are not different from each other. But due to the lower tax rate, flexibility and multiple advantages people prefer this structure for the early stage of business.
With the inclusion of partners, the control over operation reduces. Hence, these proprietors choose to run the business single-handedly and land upon sole proprietorship firm registration. Although there is no specific Act to regulate this organization, there are many ways to register a Sole Proprietorship firm. Small businesses aiming to take lower risks prefer this structure.
In a sole proprietorship, the proprietor has full control over decision-making and operations, without the need to report to anyone or take orders. There is no external interference, and compared to corporate firms, the compliance and disclosure requirements are minimal throughout the financial year. As a result, government involvement is also limited.
Setting up and registering a sole proprietorship is a straightforward process with no complex procedures involved. The cost of registration is significantly lower compared to other business structures. The business operates under the proprietor’s personal identity, allowing them to run it either under their own name or with a separate legal name as a brand.
The proprietor is the sole owner of the business and thus retains all the profits generated. The business assets are considered personal assets of the proprietor, and vice versa. The proprietor has full control over when to withdraw profits or choose to retain them.
A proprietorship business is not treated separately for income tax purposes. The income of the business is taxed under the individual tax slabs applicable to the proprietor. Tax rates are generally lower compared to other business structures, like companies or partnerships. Additionally, the proprietor can benefit from tax deductions, with a combined Income Tax Return (ITR) for both the individual and the business.
The proprietor must be an Indian citizen and a resident of India. No prior approval is required to start the business. However, Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can only invest in or start a sole proprietorship business with prior approval from the Government of India.
A Sole Proprietorship is an unstructured business model, and there is no specific law mandating its registration. LegalWiz.in offers Sole Proprietorship registration services under the MSME (Micro, Small, and Medium Enterprises) Development Act, 2006, as per the Central Government regulations. The business entity must meet the necessary registration requirements to qualify.
A Sole Proprietorship can be started with any amount of capital, as long as it is sufficient to begin operations. There are no restrictions on infusing or withdrawing funds, allowing the proprietor to adjust the capital whenever needed. The decision to introduce or alter capital in the business rests entirely with the proprietor, as they are the sole owner of the firm.
To open a bank account in the name of a Sole Proprietorship, the Reserve Bank of India requires the proprietor to submit two forms of registration, along with the PAN card, identity proof, and address proof of the proprietor.
The two forms of registration can include any of the following: MSME registration, GST registration, registration under the Shop & Establishment Act, professional license, Chartered Accountant certificate, or other documents specified under the RBI’s Know Your Customer (KYC) norms or the requirements of the respective banks.
There is no formal registry or regulation for registering the name of a Sole Proprietorship firm. As a result, the firm can choose any available name, as long as it doesn’t infringe on existing trademarks. To ensure exclusive use of the business name, the best option is to obtain trademark registration. This provides legal protection and prevents others from using the same or similar name.
A sole proprietorship does not have a separate legal identity from its proprietor, even after registration. As a result, the firm and the proprietor share the same PAN card. Additionally, the assets and liabilities of the proprietor are directly tied to the business, meaning they are considered the same for both.
A registered entity under the MSMED Act can access subsidies, incentives, and government schemes tailored to specific businesses, based on its registration certificate.
Any business entity is eligible to apply for registration under the MSMED Act. However, the Central Government has recently excluded trading activities from this registration. Businesses engaged in trading activities can instead apply for registration under the Shop & Establishment Act.
A Sole Proprietorship firm is characterized by being owned and controlled by a single individual, meaning it cannot have any business partners. If your business requires the involvement of partners, you may consider opting for a Partnership Firm, Private Limited Company, or Limited Liability Partnership (LLP), depending on your needs.
A Sole Proprietorship business is entirely owned, managed, and controlled by a single individual. As a result, proprietorship firms cannot issue shares or attract investors.
A Sole Proprietorship must file its annual tax return with the Income Tax Department. Depending on the nature of the business activities and any applicable registrations, other filings such as GST returns may also be required. However, unlike Limited Liability Partnerships or Companies, there is no need to file annual reports or accounts with the Ministry of Corporate Affairs for a Sole Proprietorship.
A proprietorship can be converted into a company or LLP, but the process is often complex, costly, and time-consuming. For this reason, many entrepreneurs choose to start an LLP or company right from the beginning, after consulting with experts, to avoid the challenges of conversion later on.
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Kickstart your own business with a Sole Proprietorship registration!