What is a Sole Proprietorship?
A sole proprietorship is when a business is owned and governed by one person. This type of business can be started in 15 days. This makes it one of the most popular kinds of businesses to begin in the unsystematic sector, specifically among merchants and small traders. For a sole proprietorship business, registrations are not required as they are identified by alternate registrations such as GST registrations. However, its liability is unlimited and it does not have a eternal succession
Why should I register as a Sole Proprietorship?
- Ease of setting up: A sole proprietorship business does not have any specific registration requirements and the proprietor’s legal identity is used by the business. Hence, a proprietorship can be started without any registration.
- Ease of operation – Decisions happen faster since there is only one decision maker. There is no concept of a board meeting or approval from other persons in a proprietorship firm.
- No profit sharing – No other business, other than that of a sole proprietorship and one person company, entitles the owner as the sole beneficiary of profits. In all other types of an entity like a partnership, LLP or company, profit has to be shared with at least one other person.
- Lower compliance requirements since a proprietorship firm is not registered with any Government authority like the Ministry of Corporate Affairs. Further, the proprietor would only have to file income tax returns if the firm has taxable income of more than Rs.2.5 lakhs per annum.
- Lower tax liability due to a variety of deductions available to the sole proprietorship setting.
How to register as a sole proprietorship?
Proofs required for sole proprietorship registration
To register a sole Proprietorship, the following documents are required:
- Aadhar Card
- PAN Card
- Bank Account
- Registered office proof
Although sole proprietor doesn’t require any specific registrations, he is advised to obtain a few registrations to make his business function smoothly.
- Registering as SME
- Shop and Establishment Act License
- GST Registration