Sole Proprietorship Registration
Simple form of business for single owner with minimum compliance
What is a Sole Proprietorship?
An Individual or sole trader running a business independently is a proprietorship firm. The term “Sole Proprietorship firm” is not defined legally under any Act. Hence, there is no separate legal existence of the proprietorship firm. There is no specific proprietorship firm registration. It can be registered under different Acts such as MSME, GST, Shop & Establishment Act, Professional Tax, etc.
As the proprietorship firm is not a separate legal entity, the government does not issue a separate PAN card for a proprietorship firm alike other entities. As a result, the PAN of a proprietor will be the PAN of the firm.
A proprietorship firm is easy to start with minimal cost and investment. It is an unorganized form of business structure that is a very easy to manage for an Individual. It is very simple form of business which has minimum annual compliances. Hence, maintenance charges are very less.
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Benefits of Sole Proprietorship Registration
Easy to start business with less legal formalities
A proprietor can easily start the firm by taking the registration under any Act as mentioned above by following minimum legal procedures.
Minimum set-up cost
The registration cost of a proprietorship firm is very less as compared to other entities such as Partnership Firm or Limited Liability Partnership or a Company.
Enjoys sole decision power
The proprietor is the sole owner of the firm; hence he/she will be the sole decision-maker in the firm. The functions can be easily carried on independently.
Minimum compliance
There are no specific compliances to be carried on by a proprietorship firm. If the Act under which it is registered provides any compliance then one has to comply. For E.g. if the firm is registered under GST then it has to file GST returns.
Less maintenance cost
The proprietorship firm is a type of business with minimum compliance at minimum cost. Hence, one can more focus on carrying on their business rather than worrying about the compliance part to avoid penalties.
Simple taxation
The proprietorship firm is not a separate legal entity; it is dependent on the proprietor. The PAN of the proprietor will be considered as the PAN of the firm. Due to which the income of the firm will merge with the income of the proprietor hence there is no need to file a separate income tax return of the firm.
Required Documents for Sole Proprietorship Registration
Documents required
- Self-attested PAN card
- Self-attested Adhar card
Immediate post registration compliance
A proprietor must open a current bank account in the name of the firm to ease the receipts and payments and enjoy other benefits of the current bank account.
Difference between Proprietorship Firm and One Person Company
| Proprietorship Firm | One Person Company | |
| Meaning | A firm owned and managed by an Individual. | A company owned by a single person. |
| Legal Existence | No separate legal existence. | OPC is a separate legal entity from the owner. |
| Governing Authority | No specific Act under which a proprietorship is governed. | An OPC is governed by the Ministry of Corporate Affairs and incorporated under the Companies Act. |
| Liability | The liability of the owner is unlimited. | The liability will be limited up to the subscribed capital of the company. |
| Perpetuity | The Proprietorship firm does not have perpetual succession. | An OPC is a separate legal entity hence it has perpetual succession, hence the company can carry on its business even the owners are changed or after the death or inability of the owner. |
| Audit | An Audit is not mandatory up to a certain amount of turnover. | Audit is mandatory from the first year of its incorporation. |
| Compliances | Very less compliance | More compliance to be carried on as compared to proprietorship firm |
| Maintenance cost | Very less. | The cost is more than the proprietorship firm. |
| Tax Rate | As per slabs provided for an individual. | A Corporate tax slab will be applicable. |
| Credibility | Less credible as it is an unorganized business structure. | More credible as it is registered and governed by specific ACT and it is a separate legal entity. |
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Sole Proprietorship Registration
A form of business which is carried on by a sole owner is known as a proprietorship firm.
There can be only a single owner in a proprietorship firm. The proprietor can appoint the employees in the firm.
For proprietorship registration under MSME, PAN card and Adhar card of a proprietor is required.
A proprietorship firm can be started with any amount of capital, there is no minimum requirement.
A proprietorship firm can be registered with any name. There is no need to check the availability of the name.
Proprietorship registration under MSME only takes 2-3 working days.
The income tax department does not issue a separate PAN to a Proprietorship Firm as it is not a legal entity. Hence, the PAN of the Proprietor is used as a PAN of the firm.
The requirements for opening a current account change from bank to bank. Further, it also requires any other registration such as GST or Shop & Establishment or Professional tax, or any other government registration.
As a sole proprietorship firm there are no compliances. But if it registered under other Acts such as GST or Professional Tax then one needs to comply with all the compliances provided under such Acts.
The income of the proprietorship firm is not separately taxed. It will merge with the income of a proprietor and it is taxed as per the applicable tax rate to an individual.
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