Sole Proprietorship Registration

What is Sole Proprietorship?

A sole proprietorship means a business carried on by only one person. The decision-making and management of the business is in the hands of a single person. There is no as such registration required for sole proprietorship as anyone can easily start this business with no formalities and few compliance requirements. In case you are not having enough cash in your hands but you still want to start your own proprietary firm or proprietary company, you can easily go with this option. This form of business entity is especially popular among small traders and merchants. Liability for this form of business entity is unlimited and doesn’t have perpetual existence.

Why Sole Proprietorship is Popular in India?

Sole proprietorship is a popular form of business now days and many business entrepreneurs prefer them over other forms of business because of the following reasons –

• Sole proprietorship is one of the oldest and simplest business structures that a business owner can handle single handedly.
• Simple business form to start with and close.
• Flexibility in carrying out business activities.
• Very economical as compared to other forms of business entity.
• It has minimal compliance requirements.
• You are the only decision maker – Not answerable to anybody and independent to give instructions and orders.
• No tension of sharing income & profits with anyone.
• Only you are responsible for the profits you earn and losses you incurred.

Common Registrations for Sole Proprietorship

A legal authenticity of a sole proprietorship is established after getting various registrations & licenses. Some of the common registrations obtained by a sole proprietor are as follows –

MSME Registration

Sole proprietor needs to obtain Udyog Aadhaar or MSME Registration online within the business name in order to give legal authentication to his/her sole proprietorship firm.

GST Registration

If goods or a service sold/provided by the proprietor crosses the GST turnover threshold registration limit, it becomes necessary for the sole proprietor to apply for GST registration.

• GST registration for traders It is mandatory for the sole trader to obtain GST registration when the annual turnover of goods exceeds Rs.40 Lakhs annually.
• GST registration for service providers – It is mandatory for service providers to obtain GST registration when the annual turnover of services exceeds Rs.20 Lakhs annually.

TAN Registration

When sole proprietor make salary paymentsto their workers on which TDS deduction is required, it is necessary for him to obtain TAN from the income tax department.

FSSAI Registration

When sole proprietor is involved in a business of selling or handling of food products, it becomes mandatory for him to obtain FSSAI registration.

Import Export Code Registration

If sole proprietor is engaged in the business of import and export of goods to/from India, it is necessary for him to obtain import export code from DGFT within their business name.

Bank Account Opening for Sole Proprietorship

You must have PAN card and Aadhaar number in order to open bank account for sole proprietorship. If you are having both these documents, you can visit any bank to open your bank account. In addition to these documents, you must carry identity and address proof at the time of visiting bank. It is necessary to submit GST registration document to the bank officials at the time of opening current account.

Documents Required for Sole Proprietorship Registration

There are various documents which you need to submit in order to get yourself registered as a sole proprietor –

• Latest passport size photograph – Submit a latest passport size photograph. Photograph should be recent with a clearly visible face.
• Aadhaar number – Aadhaar card is a 12 digit unique number provided to all Indian residents for verification of their identity. Now days, Aadhaar number is the basic requirement in any type of registration in India. If you are not having Aadhaar number, visit your nearest Aadhaar seva Kendra to obtain a new Aadhar card number. When you apply for Aadhaar card number, it will be delivered to you at your home address within 15-20 days.
• PAN card – PAN card is the most useful document needed to file tax returns to the income tax department. If you are not having PAN card, apply for it now. You only need to submit e-form, photograph, identity proof and address proof to apply your PAN card. After successfully submitting the application, it is being checked at NSDL for verification and later the PAN card is issued and delivered to the applicant’s address.
• Bank account – As a sole proprietor, it is important for you to open a bank account for sole proprietorship registration. Any document can serve your purpose: a cancelled cheque from your personal bank account or bank statement or passbook front page.
• Registered office proof – As a sole proprietor, you need to provide your registered office proof at the time of sole proprietorship registration –
1. If your property is rented, you need to submit rent agreement and NOC from the landlord
2. If your property is self-owned, you need to submit electricity bill or any other address proof of the registered place.

Advantages of Sole Proprietorship

There are various advantages that a sole proprietorship offers to a business owner –

• This form of business is easy to start and manage.
• It is owned, controlled and managed by a single person.
• Business control and decision making is to be handled by a single person only.
• This form of business is less expensive to start with in comparison to others.
• A sole proprietor hasfew formalities and minimal compliance requirements.
• You don’t have to do corporate tax payments as a sole proprietor.
• There is no problem of sharing profits as single person is operating and managing the whole business.
• There is no need for sole proprietor to get its accounts audited specifically every financial year. Auditing depends upon the business nature and threshold turnover limit.
• Financial reports under sole proprietorship are not made public for the users. It remains under the wrap.

Compliances Required for Sole Proprietorship

The most important compliances which an individual needs to follow as a sole proprietor to remain compliant and to run his/her business smoothly are as follows –

• Annual filing of income tax return.
• ST return in case you are a GST registered user.
• Deduction and filing of TDS return if you are liable for tax audit.

Entity Comparison Guide