Ownership: Meaning, Advantages, Disadvantages and Registration
Sole Proprietorship is one of the earliest and easiest business structures to establish in India. A sole proprietorship is a business in which the owner owns, manages and controls the entire operation. Since the owner and franchisee are the same, it is relatively simple to get started and has very few compliance obligations. A sole proprietor cannot have additional partners or shareholders because the proprietor and the business are one and the same. Also, there is no limited liability coverage for the franchisee from the sole proprietorship's business activities. One should know every thing clearly when they are looking to register a llp company in india.
As a result, this type of corporate structure is best for small companies with fewer than five employees. A private company is not taxable as a separate legal entity in India. Alternatively, business owners include their business taxes on their personal tax forms. A sole proprietor's business income is included in his income after deducting business expenses, tax deductions and other related income from gross income. A business is entitled to income tax exemption just like every individual assessee. The amount will be deducted as per current IT rules and slab rates applicable to his taxable income. In contrast, income taxes for limited companies are assessed on a flat rate basis.
Is it easy to set up a sole proprietorship in India?
In India, establishing a sole proprietorship is a simple process. Before you consider how to start a sole proprietorship business in India, you should consider the following:
1. Select an appropriate business name.
2. Choose a convenient site as a designated place to practice your business.
3. Open a current account in the name of your company with any bank.
Sole Proprietorship: Documents required for registration
The four requirements for starting a business are:
• pan card
The PAN card of the owner business is in their name. A sole proprietorship business does not get a definitive PAN card as it does not have an independent legal status like a company.
• Aadhaar card
Aadhaar card is required to apply for any registration in India.
Bank Account
A sole proprietor should create a bank current account in the name of his sole proprietorship. This account should be used for all franchise business activities. To open a Sole Proprietor Current Account, you need to provide proof of sole proprietorship and proof of registered office address. GST Registration, MSME Registration or Shops and Enterprise Act License is the document of existence of sole proprietorship. If you do not have such documents, you can send the license/certificate issued to your sole proprietor like Labor License, Mandi License, Police Department Permit/Licence, Sales Tax Certificate, State/Central Pollution Control Board Permit. , Gram Panchayat Certificate, Importer-Exporter Code Certificate, TAN/TIN Certificate, etc.
• Proof of registered office (lease agreement or property documents)
You can lease space to use your e-commerce/online form as a workspace. Your registered office address proof is lease agreement and NOC from the owner to run your private business. If you operate an online/e-commerce business from your home, your residential address proof or your electricity bill registered office address proof, delivery/sending of invoices for goods or services to your customers mentioning your home address etc. If you rent your home, you will need to submit a rental agreement and a letter of authorization from the owner to run your business from home as proof of your office address.
Sole Proprietorship: Advantages
• One can easily start this business only by following the minimum compliances.
• A sole proprietorship business is less expensive compared to an LLP or a corporation.
• Sole proprietors have complete control over their business and its operations.
• As only one person is involved in the business, decisions can be made easily.
Sole Proprietorship: Disadvantages
• A sole proprietor has unlimited liability.
• Since no one else is involved, the business can end if something happens to the sole proprietor.
• Raising capital for a business is complicated.
Sole Proprietor: Registration
The entire process usually takes 10 days, but is subject to departmental procedures.
SME registration
The MSME Act allows you to register as a Small and Medium Enterprise (SME). The request can be submitted online. Although it is not necessary to register as an SME, it is very useful, especially when applying for a business loan. The government is implementing several initiatives for SMEs where loans are provided at low interest rates.
Licensing under the Shops and Establishments Act
As per the local rules, the establishments are required to obtain a license under the Shops and Establishment Act. It is based on the size of the company and the number of employees. Generally, all sole proprietors operating a business or opening a business facility must obtain this license.
Registration for GST
If your total revenue or turnover in a financial year is more than Rs.40 lakh, you need to register for GST. Companies registered in special category states, on the other hand, have to seek GST registration if the threshold is above Rs 20 lakh. Regardless of revenue, any e-commerce seller on an e-commerce integration portal like Flipkart or Amazon should be GST registered. Any individual or company considering starting their own e-commerce business should get GST registration. Following documents are required for GST registration:
• Owner's PAN Card, Photograph and Aadhaar Card
• Proof of Business Location (Utility Bill/Rental Agreement)
• Copy of bank statement (first page to verify bank account number, address and IFSC code)
GST registration is easy and can be completed using the GST portal. Usually, GST number will be issued within 3-4 days of submission of application.
Sole Proprietor: Compliances
Filing of Income Tax, TDS and GST returns annually is mandatory.
