Sole Proprietorship Registration is a perfect option for individual entrepreneur, sole trader or someone who does not want to get into the long process of forming a company. In addition, setting up a new company requires an initial investment in for of fees which is not the case with sole proprietorship. First step starts with just opening a current account to ensure safe payments in the proprietorship’s name. Hence, generating a current account is considered to be the groundwork for starting this type of business.
One of the most common structures of business in India. According to GOI, Sole Proprietorship is a single person establishment where the individual manages and controls their business on their own. Accordingly, it is cost-effective as there no fees to pay during the initiation of the process. Further, the primary establishment is easy as there is no need for registration. Consequently, by omitting registration we are spared of government amenability and supervisory paperwork.
Few Other Benefits of Starting a Sole Proprietorship Firm
- The owner has overall control and claims the ownership stake
- Requires no minimum capital investment
- The profit solely belongs to the proprietor
- The tax assistances avert double taxation
- The owner is accountable only to file an annual tax return and pay tax as an individual
- No separate tax for the firm
Mandatory Requirements to Start a Sole Proprietorship
The four necessities to start the business are
- Aadhar card ‘
- PAN card
- Bank account
- Registered office proof (Rent Agreement or Property Documents)
Starting the Business
The process of registration is mainly to mark the existence of the establishments. In the case of registration, the corporation is brought into being through the eyes of the government. On the other hand, staring the business is bringing it into reality and thereby attaining functionality. In India, a sole proprietorship can be established with only two things:
- Choosing an apt name for the business
- Choosing the location of the business
Registration of Sole Proprietorship
As mentioned earlier, there is no rigid protocol to register a Sole Proprietorship. Because this is an extension of the proprietor. Nonetheless, its existence is established by generating a bank account in the name of the proprietorship. Otherwise, it can be through attaining the licenses necessary to conduct business.
By Opening an Account
The most important step in opening an account is the submission of correct documents. Thereupon, any of the two documents from the list below can be used for this purpose
- License or certificate from Municipal Officials under Shop and Establishment act
- Property Registration document
- Rent Agreement along with utility bill
- License from registering Authority
- License for the concerned individual from central or state government
- IEC code
- Income Tax return of the proprietor (Complete)
- Utility Bills
By Issuing License
Depending on the type of business, the license issued for registration varies. Few of them are:
- PAN Card for the Proprietor- Obtaining a PAN card is an absolute necessity in the business sector. Because, it aids in attaining license and certificates, company registrations, and filing the tax return for Sole Proprietorship. Emphasize that, the PAN remains the same for business and proprietor. Thereby, this is the first step while establishing a Sole Proprietorship.
- GST Registration– For manufacturing and trading businesses in India with expected turnover over Rs 40 Lakhs and Rs 20 Lakhs for special category states should get GST registration done. Further, all the businesses related to goods and services must possess a GST registration. Thereby, to attaining GST is a good license while trying to start a Sole Proprietorship.
- Shop and Establishment Act license- this acts as a proof of existence. Additionally, most businesses dealing with shops and factories issue this license
- MSME registration- easily attainable in most of the states in our country if the firm is acceptable under the MSME sector. Obtain Udyog Adhaar Certificate.
In conclusion, by attaining these requirements one can legally start a sole proprietorship business.