Proprietorship Registration India Verified

Proprietorship Registration India

The sole proprietorship is one of the oldest and easiest business structures to start in India. It is a type of business owned, managed, and controlled by one person, who is the proprietor. Because the proprietorship and proprietor are the same, it is very easy to start, with minimal compliance requirements.

Proprietorship Registration India

As the proprietorship cannot have other partners or shareholders, and there is no limited liability protection for the proprietor, this type of business entity is best suited for very small businesses with no more than 5 employees.

We can help in registering a sole proprietorship, a simple and efficient business structure ideal for solo entrepreneurs. With expert guidance and a streamlined process, you can start your proprietorship firm registration online quickly and hassle-free. Start your Sole Proprietorship registration with us and unlock the potential of your business ideas.

Proprietorship Registration India

In India, registering a proprietorship follows a unique approach because there isn’t a dedicated government-established registration process for this business structure. Instead, a proprietorship firm gains recognition through tax registrations mandated by relevant laws and regulations. One important tax registration is the GST (Goods and Services Tax) Registration, which must be obtained under the proprietor’s name to formalize the business’s proprietorship status. This registration signifies that the proprietor is conducting business within the framework of a proprietorship.

Essential Licenses and Registrations for Proprietorships

To run a proprietorship in India, you need important licenses and registrations, including:

• Get a Permanent Account Number (PAN) and an Aadhaar card for your business identification.
• Register under UDYAM, which recognizes your business as a Micro, Small, or Medium Enterprise (MSME) and offers government benefits.
• If your business exceeds specific thresholds, you must register for Goods and Services Tax (GST) to collect and pay GST.
• Open a separate bank account for your business to manage finances smoothly.
• Depending on your business location, register under your state’s Shops and Establishment Act to follow local labor regulations.

Advantages of Sole Proprietorship: Proprietorship Registration India

1. Easy registration: Sole proprietorships do not have a formal incorporation or dissolution process since the proprietor and the business are considered the same. However, the proprietor may need to obtain certain registrations and licenses to comply with Indian laws and regulations.

2. Lower compliance: Since most proprietorships are only registered with government departments like Income Tax & GST, the compliance burden is lower compared to entities like LLP or Company, which must file various statutory returns and undergo annual audits by a Chartered Accountant.

3. Simplicity: Due to the absence of partners, shareholders, or directors, the proprietor can operate the business with minimal documentation and consent requirements. Therefore, this business structure is suitable for very small businesses.

4. Business decision-making: In a proprietorship, the business owner makes all decisions without requiring consent or approval from others. This allows the proprietor to make quick decisions regarding business affairs.

5. Complete control: As the sole owner of a proprietorship, the proprietor has full control over assets, revenue, expenses, and all business operations.

Disadvantages of Sole Proprietorship: Proprietorship Registration India

Funding: This business structure relies solely on one person’s savings, borrowings, and credit history. Since there are no other individuals involved, obtaining funds from banks can be challenging. Raising equity funds is not 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, their assets can be attached or encumbered. Therefore, the proprietor will be held personally liable until all the liabilities are settled.

Business continuity: In the event of the business owner’s death or disability, the sole proprietorship will be automatically dissolved, resulting in no business continuity.

Growth: Proprietorships face various restrictions in terms of fundraising, liability, and business continuity. As a result, only very small businesses in the unorganized sector operate as proprietorships.

Unincorporated business: Sole proprietorships are unincorporated, meaning there is no centralized database to check if a sole proprietorship is active or inactive. Consequently, sole proprietorship entities are mostly classified as unorganized businesses.

Proprietorship Registration India

Obtaining Shops & Establishment Act License for Proprietorship

From state to state, the process for acquiring a Shop and Establishment registration certificate changes. It is available both online and offline. In most states, Shop and Establishment Act registration can be obtained within 2-3 weeks.

Timelines for Sole Proprietorship Registration

A sole proprietorship registration can normally be done in India through EYC International in less than 10 days. However, the timelines for registration will vary from case to case depending on the government and bank processing timelines.

Proprietorship Business Activities

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, defense, and 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.

Compliances for Proprietorship

Income Tax Filing: The business owner of a proprietorship will have to file a personal income tax return using the 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 may be applicable to the proprietorship based on industry and location.