A sole proprietorship is a popular type of business in India run by one person. It’s ideal for individuals looking to start a business with minimal investment. You can set up a sole proprietorship from home or at a small location, using a limited amount of money. The owner has complete control over the business, making all decisions and keeping all profits. However, they are also responsible for any losses. While the owner can hire others to help run the business, they still retain full ownership. Some common examples of sole proprietorships include grocery stores, beauty salons, boutiques, and small retail shops. This structure is also suitable for small traders and manufacturers.
Any Indian citizen can get a Sole Sole Proprietorship Registration, having a current bank account in sole name or name of the business to take the business forward and operate. The Proprietor should apply for GST Registration on the GST Portal, MSME Registration on the Udyam Portal and obtain Shop & Establishment Registration. In case of Proprietorship Firm, the PAN of Proprietor and Firm are the same.
What are the Pros and Cons of Sole Proprioetorship Firm in India?
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Pros
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Cons
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Easy registration
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Personal liability
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Simple requirements
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Business continuity
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Complete Control
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Raising Funds
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Less compliance
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Restricted growth
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Easy Decision making
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Unorganised business category
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Documents Required for a Sole Proprietorship Registration in India
The below are the documents required for a Sole Proprietorship Registration in India to run a business.
- Copy of the PAN Card of the owner
- Copy of Aadhar card/ voter ID/ DL/ Passport
- Utility bill i.e., electricity/water bill/ rent agreement/ NOC
- Cancelled Cheque / Bank Statement
Some important Registrations required to open a Sole Proprietorship in India:
- Register duly as a Small and Medium Enterprise (SME) under MSME Act
- Shop and establishment Act license per the local laws
- GST registration (annual turnover above 20lakhs/ online business)
In addition to the above, there may be additional registrations and license required depending upon the state, industry and local regulations.
Procedure for Online Sole Proprietorship Registration in India
To begin with the Online Sole Proprietorship Registration in India, the PAN and Aadhar of the owner is essential.
- GST Registration – The Proprietor must obtain the GST registration through the GST portal where the turnover is more than 20 lakhs and to run an online business and the below documents are required:
- PAN of the owner
- Digital Signature Certificate (DSC) of Authorised Signatory
- Declaration as authorisation to Authorised Signatory
- Consent of owner for GST Registration Certificate
- Passport photo of Owner and Authorised Signatory
- Bank account details through a cancelled cheque
- The copy of rental/ lease agreement (name of owner)
- Address proof documents
- Utility bills and other documents are required to be produced
- Opening a Bank Account – The Bank account should be in the name of business owner using the owner’s PAN and submitting the below:
- GST Registration certificate
- Shop & Establishment Act license
- Bank may accept the Importer Exporter Code (IEC) issued to the Proprietorship Firm by the DGFT officer as a document
- License issued by registering authorities such as ICAI, ICSI, Indian Medical Council etc.
- Shop & Establishment Act – The process to avail the Shop & Establishment Act license for Proprietorship Firm would vary from state to state and is usually obtained within 2–3-week time period.
The Sole Proprietorship Registration usually takes 2 weeks; however, it would again be dependent on various factors like the processing timelines on part of bank and government procedures.
Compliance for Sole Proprietorship Firm in India
The following compliances should be adhered as applicable to Proprietorship Firm where the turnover is more than INR 2.5 Lakhs for IT return.
- Income Tax filing – The proprietor of the Proprietorship Firm should file the income tax return on time using the e-form ITR-3 or ITR-4. The business income shall be declared duly in the income tax return forms per the income tax regulations.
- GST Return – the proprietor once avails the GST Registration should file the GST Return every month and quarter as applicable per the business scheme under which the business activity has been registered.
- TDS Return – proprietorship firm having employees or transaction of goods and services crossing a certain threshold, respective amount of tax must be deducted at source and TDS Return should be filed every quarter.
The Proprietor can undertake any business activity depending on the industries and sectors. Though per the law, there are certain listed activities which requires special approval from Government such as insurance, banking functions, lending, telecommunications, defence. It is advisable to seek the advice of a professional consultant or legal expert to understand the compliance requirements and ensure that the business operates in compliance with local laws and regulations.
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