What is a Sole Proprietorship?
A sole proprietor only needs to register his or her name and secure local licenses, and the sole proprietor is ready for business. A sole proprietorship is started by those entrepreneurs willing to start their commercial enterprise that is less complex as compared to other business structures in India.
- Ownership: In this type of business unit, a single person owns the entire business, meaning by all the assets belongs to the Sole Proprietor. He bears all the risks associated with his business. Hence, the business can be ended at any point of time whenever the sole Proprietor.
- No sharing of Profit as well as Loss: Whatever be the income earned from the sole Proprietor, it belongs to him only. He is not required to share it with any other person and Consequently, there is no sharing of profit and losses as may be generated by the business.
- Capital: The capital which is required to commence the business or to carry out operations, is brought into the business by the Proprietor himself, ie., through personal mode resources or through borrowing the same from any bank, financial institutions, or form friends and relatives.
- Unlimited Liability: it is one of the major concerns for a sole proprietorship, the liabilities are unlimited. In case of any loss, the personal property of the Proprietor can be utilized in order to set off the debts.
- Less Legal Formalities: Legal Formalities requirements for formation, operation, and closure of a sole proprietorship business is nil. The business does not require any registration. However, for different benefits/incentives, he can register himself voluntarily and can have a certificate of registration.
- Control: As there is only one person who is in charge of all the activities, he has full control of the business. Meaning by, the sole Proprietor takes all the decision and executes it, in the manner he likes.
Advantages of a sole proprietorship:
The benefits of sole Proprietorship include:
- Quickly to establish a business ie., instantly, inexpensively and easily.
- Sole proprietorships do not have many legal formalities to be taken care of.
- A sole proprietor need not pay tax on himself.
Disadvantages of a sole proprietorship:
The disadvantages of a sole proprietorship include:
- The owner’s personal property can be attached in case of any disputes being made or any fraud is done.
- it is very difficult to raise funds in case of a sole proprietorship business.
Documents Required to Registered A Sole Proprietorship
in order to start a Sole Proprietorship business, the following document(s) are required:
- Identity proof.
- Address and.
- Rent Agreement/sales deed.
What Are The Documents Required For Opening A Current Account?
- Any Proof of the existence of your business.
- Shops & Establishments Act Registration. (For shop registration read more).
- Identity proof.
- Address proof.
What are the Compliances required after registering as a sole proprietor?
- As a sole proprietor, you must file Income Tax Return annually.
- Also, you need to submit your GST Return if you are registered under GST.
- A sole proprietor should also deduct TDS and file TDS return if liable for Tax Audit.
Common Registrations for Proprietorship
Following our the registration which can be procured by the Sole Proprietor in order to establish his identity,
MSME Registration: MSME or Udyog Aadhaar registration can be obtained in the name of the business to develop that the Sole Proprietorship is registered under the Ministry of Micro, Small and Medium Enterprises.
TAN Registration: TAN Registration must be obtained for the Proprietor from the Income Tax department if the Proprietor is making salary payments wherein TDS deduction is required.
GST Registration: GST registration must be obtained if the Proprietor is selling goods or services that cross the GST turnover threshold limit for registration. In most states, GST registration is required for service providers having annual revenue of more than Rs.20 lakhs and in case of traders – yearly revenue of more than Rs.40 lakhs.
Import Export Code: Import Export Code or IE Code can be obtained from the DGFT in the name of the business – in case of a Proprietorship business undertaking export and/or import of goods into India.
FSSAI Registration: In case the Proprietorship is involved in the selling of food products or handling of food products, FSSAI registration must be obtained from the Food Safety and Standard Authority of India in the name of the Proprietor.
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