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Sole Proprietorship

Sole proprietorship is a type of business which is entirely run by one person and in which there is no legal distinction between the owner and the entity. It is one of the oldest forms of business in India. The person who manages this type of business is solely and personally responsible for the debts.

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Advantages of Private Limited Company

No Governing Law

It is not governed by a separate law and there aren’t many rules and regulations to follow. There is no need of incorporation or registration compulsorily. Generally, a licence to operate suffices as one of the most reliable mediums of existence of sole proprietorship.

No Profit Sharing

Owner enjoys the entire profits from the business. He doesn’t need to share them with any other person as he is the sole stakeholder. He can withdraw the profits from the business for his own use.

Easy to Form

It can be established easily and instantly.

Quick Decision Making

The decisions made are quicker as the sole proprietor has complete control over the entire business.

Confidentiality

There is a great deal of confidentiality in the proprietorship business as the law doesn’t require a proprietorship to publish its financial accounts or any other such documents for availability of the general public.

Less Formalities

Very less formalities are involved in the sole proprietorship business.

Sense of Satisfaction

It gives great sense of satisfaction and achievement to the owner to be its own boss and not being answerable to anyone. It is a great boost to the self-worth of the owner.

Less Compliance Cost

It is inexpensive as compared to other forms due to its fewer compliance requirements.

Tax Benefits

As per the Income Tax Act, 1961, sole proprietors can take the benefit of paying lower taxes and declaring incomes on presumptive basis where the books of accounts are not maintained.

Process of Registration

There are generally no compulsory registrations required to be taken by the Sole Proprietor. However, following voluntary registrations may be taken if the owner wishes to expand the business:

If the supplier is engaged in providing taxable intra-state supply of goods and services and the aggregate turnover exceeds the specified limit OR engaged in providing inter-state supply of goods or services OR wishes to take voluntary registration, he may register under GST. This gives the owner the benefit to avail loans, declare the turnover to have a record, avail credits and expand the business.

After getting the certificate of GST Registration, the Owner can get the Bank Account opened in the name of the sole proprietorship. Banks accept GST Registration Form and Number as a valid proof for opening bank account in the trade name of the proprietorship.

Shop and Establishment Act is covered under state legislation and each state has its own rules and regulations for the same. Since rules are framed by the state government, they will differ from state to state.
All the shops, hotels, eating houses, restaurant, theatres, places of public amusement or establishment and any other commercial establishment etc. are covered under the Shop and Establishment Act and are required to obtain registration under it. Within 30 days of the commencement of establishment, registration under Shop and Establishment needs to be applied.

Trademark refers to brand or logo. It can also be obtained for a business name, distinctive catchy phrases, taglines or captions. Trademark Registration can help prevent repetition or duplication of goods or service by competitors or other persons. It also ensures that the investment put into the business and efforts are protected from unidentified sources.

Documents required for Incorporation

ID Proof

ID Proof of the Owner

Address Proof

Address Proof of the Owner

Rent Agreement

Rent Agreement of the Business Premises

Photograph

Passport Size Photograph of the Owner

Utility bill

Utility bill for the premises

No Objection Certificate

No Objection Certificate from the owner of the premises (if the premises is not owned)

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Frequently asked questions

Everything you need to know about the product and billing.

An attorney is not necessarily needed to help in starting a sole proprietorship. However, every business is unique and there might be incidences when guidance is needed on the functioning. An attorney may then be brought into picture for the necessary help.

Most local businesses and family businesses are preferably run as sole proprietorships apart from small traders and manufacturers.

The registrations under GST, Shop and Establishment and Trademark can be applied online.

Since there is no formal mechanism as per any law which defines the registration to be taken by a sole proprietorship, its existence needs to be established through tax registrations and other business registrations that a business needs to have. Hence, GST Registration can be taken in the name of the owner to establish the fact that he is operating a business as sole proprietorship.

Any Indian citizen can open a sole proprietorship. Registration may or may not be required depending upon the business planned to be established. Bank Account in the name of the proprietorship is generally required and Banks need GST or Shop and Establishment Registration Certificate for opening the same.

This type of business generally takes approximately 5-7 working days to open-up and get running. This simplicity makes it popular among small merchants and traders. It is also inexpensive to establish which makes it a widely used business structure.

The procedures have been defined for conversion of sole proprietorships into companies and partnerships.

Any person who has an idea of running a business needs only two things to run a business in India. A business name and a location of doing the business are those essential things to run a business in India.