What is Sole Proprietorship?

It is the simplest business form under which single person can operate a business and is not a legal entity, it simply refers to a person who owns the business and is personally responsible for its loss. It can operate under the name of its owner. The name is simply a trade name–it does not generate a legal entity separate from the sole proprietor owner.

Due to its simplicity the sole proprietorship is a popular business form, no difficulty of setup, and small charge. A distinct difficulty is that the owner of a sole proprietorship remains personally responsible for all the business’s debts. So, if a sole proprietor business runs into economic trouble, creditors can bring lawsuits against the business proprietor. If such suits are successful, the proprietor will have to pay the amount overdue with his/her own capital.

Who can apply for Sole Proprietorship?

Anyone can apply for sole proprietorship, and it is the easiest form of business done in India since it isn’t governed by any specific laws. Under sole proprietor, the compliances are minimal and easy to fulfil. Any individual who wants to begin a business with fewer assets can choose for this type of business and it can be started in a time duration of 10-15 days. Also, the control of the business is in your hands.

What are the Advantages of Sole Proprietorship?

• Owners can begin a sole proprietor right away and economically.
• Sole proprietor carries little formalities.

What are the Disadvantages of Sole Proprietorship?

• Owners must bear all losses, liabilities and debts of the business.
• Owners cannot increase funds by selling an interest in the business.
• Sole proprietors hardly survive the death of their owners.

How to register as a sole proprietorship?

The following documents are required to register a sole Proprietorship:

• Aadhar Card
• PAN Card
• Bank Account details
• Registered office proof
  • If it is a rented asset: NOC from a landlord and Rent agreement.
  • If it is a Self-owned asset: Property tax receipt or electricity bill.

Although sole proprietor doesn’t need any accurate registrations, he is advised to attain a few registrations to make his business function efficiently.

Register as MSME (UDYAM)

Under the MSME Act, you can get yourself registered as Micro, Small and Medium Enterprise (MSME). The application can be filed online. Even though it is not necessary to register as SME, it is very valuable, especially at the time of taking finance for the company. The Government runs a variety of schemes for MSMEs where loans are provided at the concessional rate of interest.

Shop and Establishment Act License

Also known as Labour Licence. This license is not compulsory at all places, but it is mandatory to be obtained according to the local laws. It is issued by the Labour Department. The fee may differ on the basis of the number of staff.

GST Registration

You can register and get GST, if your annual turnover exceeds the threshold. Also, if you are doing online business through e-commerce you are required to get a GST number.  Even if your turnover is below the threshold limit you may voluntarily apply for GST registration.

What are the Compliances required?

Three compliances are required:

• You should file Income Tax Return annually.
• You need to file your GST return in case you are registered under GST.
• You should also deduct TDS and file TDS return if accountable for Tax Audit.

We at Nadeem Sarwari and Associates, provide the best services and deliver our service on time. We offer tailored services to startups, like Sole Proprietorship, Partnership firms, Private Limited company, LLP, One Person Company, etc.