NOTE ON SOLE PROPRIETORSHIP

About : A business that is owned and managed by a single person. There is no such thing as registration with any statutory Law like Company Law / LLP Law / Partnership Act etc.;

Proprietorships are recognized by other registrations, such as a service tax registration or GST or MSME or Shop and Establishment Act.

Features of Sole Proprietorship :

  • Unlimited Liability : Just as a partnership, a sole proprietorship has no separate existence. Therefore, all debts can only be recovered from the sole proprietor.
  • The owner has unlimited liability with regard to all the debts. This should heavily discourage any risk-taking, which means that it’s suited to only small businesses.
  • If you plan on running a business that requires a loan or may end up paying penalties, fines or compensation, it’s best you look into registering an One Person Company (OPC).
  • Easy to Start: There is no separate registration procedure for proprietorship. All you need is a government registration relevant to your business.
  • If you’re selling goods online, a proprietor would only need a tax registration (GST). Therefore, starting up as a sole proprietor is relatively easy.
  • Sole proprietors will be taxed on their personal income tax rate.

Disadvantages of Sole Proprietorship :

  • Unlimited personal liability.
  • Difficulty in raising investment capital.
  • lack of financial control.
  • difficult to find outside investors to fund sole proprietorship.

List of Documents/Information required to Register :

  • Name of the Proprietor Firm ;
  • PAN Card ;
  • Aadhaar Card ;
  • Rental Agreement on Business name if available ;
  • Utility Bill – Electricity Bill copy of the address ;
  • Email id and phone number.

Steps :

Step-1 : Open a Current Account in Bank with your Proprietorship Firm name. (For Bank KYC, Two proofs required from Step-2)

Step-2 (Legal Certificate) : Get register under any 2 of the below :

  • GST Registration certificate ;
  • MSME Certificate ;
  • Shop and Establishment Act ;
  • IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of bank account. Etc.

AUTHOR : CS LALIT RAJPUT (CLICK HERE TO VIEW PROFILE)