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Sole proprietorship in India is a type of solely owned and managed business that is popular amongst small businessmen, sole retailers and traders, etc.
The business where there is no outer influence, and the decision is taken by the owner of the business. There are no shareholding of others and no joint arrangement in a sole proprietorship.
Small businessmen who are in the initial stage of business and want to grow the business locally have been given an option to form a sole proprietorship firm. These registrations are not mandatory for conducting business, but it has many perks in terms of legal requirements and tax compliance exemption.
Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process – as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.
Lower compliance: As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.
Simplicity: As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.
Business decision: In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.
Complete control: As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.
Funding: This type of business structure relies solely on one persons savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible – as this type of business entity does not allow for profit sharing or shareholding.
Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship – the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure – the proprietor will be held personally liable until all the liabilities are extinguished.
Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.
Growth: A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.
Unincorporated business: Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.
You can easily register a proprietorship online through IGLI FINANCIAL. To register a proprietorship, only the PAN & Aadhaar card of the business owner is required. We can help you obtain the following registrations in less than 15 days:
Once, you have registered for the proprietorship registration on IGLI FINANCIAL, please follow the steps below and upload the following documents by logging into IGLI APPLICATIONS (Availablein Play store & App Store).
PAN Card for Proprietorship Firm
A proprietorship is not a separate business entity. Hence, there is no procedure to obtain proprietorship PAN card. The PAN card of the business owner is used for the proprietorship.
GST registration for a proprietorship will be obtained by IGLI FINANCIAL as a part of the service. The following documents are required for GST registration:
Udyam Registration can be obtained online to avail various benefits available for small and medium sized businesses. Once the GST registration is obtained, the IGLI FINANCIAL team would help obtain UDYAM registration by submitting Aadhaar card, PAN card and GST certificate to Government.
The bank current account for a proprietorship will be opened in the name of the business owner using his/her PAN. The business owner will have to submit proof for doing business. Any two of the following documents can be submitted to create a current account instead of savings account in the name of proprietorship:
A sole proprietorship can normally be registered in India through IGLI FINANCIAL in less than 15 days. However, the timelines for registration will vary from case to case depending on the government and bank processing timelines.
A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defence, telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, proprietorship business structure only works for business activities that are small scale in nature.
The following are some of the compliances that are applicable for a sole proprietorship:
Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.
Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.
GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.
TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold – tax must be deducted at source and TDS returns must be filed every quarter.
In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.
Registration Fees for shop act license or Gumasta license is based on the State and Number of employees. No charges are levied for GST registration fees under the act.
What documents are required for GST registration for a sole proprietorship? The following documents will be required: Photo of the promoter or owner. Email address and PAN card. Legal ownership document when the Place of Business is owned by the proprietor or Rental Agreement in other cases. Electricity bill. Property tax receipt. Aadhar card and bank statement.
How to get GST registration for a sole proprietorship? Step 1: Generate TRN, which is a temporary reference number. Step 2: Open the registration application after the specific time gap given along with TRN. Step 3: Fill out the application and details about the business, proprietor, place of business, HNS code for goods and services, Aadhar Verification, etc. Step 4: The application will be processed through Aadhar authentication. Step 5: ARN number will be provided which will indicate that your details have been received by the tax authority for verification. Step 6: Once the application is approved, the credential will be provided by email and the proprietor will be able to download the GST certificate.
Since there is no mandatory obligation to take registration for sole proprietorship therefore there are no such forms named as registration forms of a sole proprietorship.
Some advantages are less compliance, ease to start a business, cost-efficient, absolute control, and ease of closing a business.
No, PAN card cannot be obtain for proprietorship. Proprietorship PAN card will be the same as proprietor PAN card. There is no separate PAN card for proprietorship business.
Any official document that has the name of the proprietor, photo and address like driving license or passport can be used as address proof for proprietorship. In addition to the above, a utility or EB bill in name of proprietor can also be submitted.
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No, GST registration is not mandatory for proprietorship. However, it is recommended that all proprietorship be registered under GST and have UDYAM registration to undertake various business activities.