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Ensure that you have Aadhar Card & PAN Card
Open a Bank Account in the name of the firm and set a licence under Shop & Establishment Act
Register under GST
Sole proprietorship or Proprietorship are similar and it is one of the most common forms of business in India, used by most small businesses man operating in the unorganized sectors. A proprietorship is a type of unregistered business entity that is owned, managed and run by an individual.
A proprietorship is a type of unregistered business entity that is owned, managed, and run by an individual. This type of business can be started within a week’s time and hence makes it one of the most popular kinds of business to begin. To start a proprietorship business, registrations are not required as they are identified by alternate registrations such as GST registrations or registration under MSME.
Every business structure renders different benefits. Following are some notable benefits offered by a Sole Proprietorship Business to its owners.
Fairly Easy To Establish
An applicant seeking to run their business affairs as a Sole Proprietor doesn’t need to undergo any registration process. They only need to secure business-specific licenses or registrations to run their business legally.
Seek Minimal Investment
Since the Sole Proprietorship model is a boon for low-cost business ideas, it is often chosen by small businesses like retail shop outlets, grocery retailers, and so on and so forth.
Incorporation of a business structure like a private limited company, OPC seeks significant expenditure in terms of capital procurement, which otherwise is nil in the case of the Sole Proprietorship model.
Ensures No Profit Distribution
The sole proprietors serve as the sole owner of their business and rejoice in uncompromised control over their profit.
Adheres To Minimal Compliance
The Sole Proprietorship business model doesn’t come under the ambit of any specific law; hence, it is free to operate without tedious compliances. Unlike entities functioning under Company Act, 2013, they are free to work without a Certificate of Incorporation or Registration Certificate. Also, they are not obligated to disclose annual reports with MCA. However, such businesses need to stay in line with applicable GST compliances. In view of this, they are also mandated to register under the prevailing GST Act.
Attract Lower Taxes
Tax authority doesn’t treat Sole Proprietorship and Sole proprietor differently. Therefore, they do not need to address separate tax liabilities. The prevailing IT Act mandates sole proprietors to file an income tax return. It is a way to disclose profit and income generated before the tax authority for the given FY.
Please remember that tax estimation is done as per the income tax slab rates as applicable to the taxpayer. Therefore, there is no requirement of filing a separate tax return for the Sole Proprietorship firm.
Seamless Decision Making
Sole Proprietorship business outweighs other business structures when it comes to decision-making. It offers complete authority to the owner to take any decision regarding business affairs without the intervention of anyone else.
No Auditing requirement for low-income firm
The financial accounts of the Sole Proprietor business are not exposed to mandatory auditing requirements. It only comes into play when a business’s income surpasses the certain turnover threshold underpinned by the concerned authority.
The Section Below Reflects The List Of Mandatory Documents That Is Required For Establishing A Sole Proprietorship Business.
Aadhar number is a must-have requirement for legalizing any business in India. Also, an IT return can only be filed if the taxpayer has synced his/her PAN card with PAN. The applicant can approach the nearest Aadhar, Seva Kendra or E-Mitra to secure the Aadhar number in a legit way.
You cannot file an IT return in the absence of a PAN. There is a dedicated government portal that enables a person to apply for PAN at a nominal fee. The standard documents required to apply for PAN include an applicant photograph, ID proof, & address proof.
The online submission of the PAN application can be made after validating it via Aadhar e-KYC. After this, it is scrutinized at NSDL for verification. Post successful verification, the authority grants the PAN number to the applicant within a week. The hard copy of the same is routed to the registered address within 15-20 days.
Once you have secured the PAN and Aadhar Number, you can approach any designated bank to open a current account. Common documents required for serving this purpose include PAN, Aadhar Number, GST registration, and address and identification proof.
Note: the applicant can furnish a copy NOC or rent agreement for address proof. Likewise, they can also facilitate utility bills to serve such a purpose.
A shop and Establishment license is a legal compulsion for a commercial establishment that vend goods or services to the customer. Owning a small establishment or a shop is a small form of business, and it is a legal compulsion for the owner to secure such a license.
GST registration applies to all forms of business whose annual turnover is above the prescribed threshold limit. At present, businesses whose yearly turnover is greater than Rs 40 lakh are mandated to secure this registration. Keep in mind that GST also covers online business owners.
Registration GuruIndia’s the only company that has an expert team of all professionals(Chartered accountants, Cost accountants, Company secretaries & lawyers) under one roof with the object to provide every business management consulting service to the client in a quality and cost-effective manner. Our team is capable to handle all registration, Legal, audit, accounting & statutory requirement with our expertise of near about two decades. We assure you that our client does not require to search for any other consultant for any of their business consulting matters.
Who can start a sole proprietorship?
Any Indian citizen with the desired name of the business can start a sole proprietorship business. Registration may or may not be required, depending on the ways and types of business you are planning to establish. However, to open a current account, banks require a business Registration certificate from you.
How do I create a proprietorship firm?
To create a proprietorship in India, all you need is a current bank account. But in india, to open a current bank acocunt, a bank may demand a business registratio certificate or shop & establishment registration certificate
Is GST mandatory for sole proprietorship?
If a sole proprietor has a turnover of less than Rs. 20 Lakhs, it is not mandatory for him to get registered under GST, but in some circumstances, like , if you wish to sell online or to another state in India, you will require GST registration.
What are advantages of proprietorship?
Sole proprietorships have several advantages over other business entities. like Easy to form, sole control of the business profits. However, they also have disadvantages, the biggest of which being that the owner is personally liable for all business losses and liabilities.
What are the limitations of sole proprietorship?
The main limitation to being a sole proprietorship are- Unlimited liability: Your small business, in the form of a sole proprietorship, is personally liable for all debts and actions of the company. Unlike a corporation or an LLC, your business doesn’t exist as a separate legal entity.
What are the types of sole proprietorship?
Self-Employed Business Owner. A self-employed business owner is someone who conducts a trade or business with the intent of making a profit. Independent Contractor or Franchise.
Can I name my sole proprietorship?
As a sole proprietor, by default, the legal name of your business is your own name. But you can choose to operate the business under another trade name, known as a Registered Business Name.
How long does it take to establish a business with Sole Proprietorship?
A sole proprietorship business does not take more than 5 days to open-up and get running. This simplicity makes it popular among small traders and merchants. It’s also much cheaper, of course. This is the other reason why it’s the most widely used business structure.
What businesses are commonly run as sole proprietorships?
Most local businesses are run as sole proprietorships, from your grocery store to a fast food vendor, and even small traders and manufacturers. This is not to say that larger businesses do not operate as sole proprietors. Even some jewellery shops are sole proprietors, but this is not recommended.
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