Sole Proprietorship Registration

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Sole Proprietorship Registration

Sole proprietorship in India is a type of solely owned and managed business that is popular amongst small businessmen, sole retailers and traders, etc. 

The business where there is no outer influence, and the decision is taken by the owner of the business. There are no shareholding of others and no joint arrangement in a sole proprietorship.  

Small businessmen who are in the initial stage of business and want to grow the business locally have been given an option to form a sole proprietorship firm. These registrations are not mandatory for conducting business, but it has many perks in terms of legal requirements and tax compliance exemption. 

What is Sole Proprietorship Registration? 

Sole proprietorship registration is not a mandatory requirement for running a business, although the registration has its advantages. This registration can be done under these acts: 

  1. Registration under the GST act if the turnover of the business is more than ₹ 20 lacs annually. 
  2. Getting Udyog Aadhar for the small and medium enterprise under MSME Act. 
  3. Registration under the Shops and Establishment Act. 

Who is a Sole Proprietor? 

A sole proprietor is a person who is the owner of the business and has complete authority over its functioning. 

A sole proprietorship is the simplest legal form of a business concern. It is also termed as individual entrepreneurship, proprietorship, or sole trader. A sole proprietorship as the name suggests is a corporate entity that is owned by one individual only. A sole proprietorship is not a separate legal entity, unlike company and partnership firms.                 

Why Should one choose Sole Proprietorship?

Generally self-employed, freelancers and other small businessmen popularly form sole proprietorship because of the simplicity of its structure and less legal compliances as compared to other business concerns. It also gives an advantage to individual small businessmen to further change the form of sole proprietorship into big corporation depending upon how scalable and expandable the business becomes in the future. 

Eligibility 

Any small trader or individual small businessman who has limited investment and at the beginning stage of incorporation of business can register his business as a proprietorship. 

The business is solely controlled and managed by an individual and hence the business where a single individual management is sufficient, is apt to formed as a sole proprietorship concern

Advantages of Sole Proprietorship Registration

A convincing way to start a small business by a sole trader is to form a sole proprietorship and experience the ease of less paperwork and reduced cost for incorporation of proprietorship. A sole proprietorship is governed by very less legal regulations, which help to save traders’ time and resources.  

Due to no separate legal entity, the trader is only taxed once in income tax and proprietorship doesn’t have to separately show its differentiated income. 

In a sole proprietorship, the control is not diluted, and decisions are made by the owner. Hence, the decision-making is stable and quick. 

How to Register Sole Proprietorship

There is no specific law governing sole proprietorship. However, if a proprietor wishes to get his business registered, he/she may do so. Few of such registrations are listed below 

  •  Registration certificate under the Shops and Establishment Act in the state in which business is located. 

  • GST registration is necessary for a business whose turnover exceeds ₹20 lacs. 

  • A sole proprietorship can also register under MSME Act if it wishes to. This registration enables the business to register as a small and medium enterprise, and thus benefits under this act can be availed.

  • Compliance Required for Sole Proprietorship Registration 

The compliance requirement in a sole proprietorship is minimum and less complex as compared to a Company registered under the Companies Act. Since there are fewer compliances and minimal processes, the resources of the sole proprietor are allocated in the expansion and growth of the business. Due to less compliance, the time is also saved and can be utilized to take key decisions of the business. 

Some basic compliances and legal forms to be filed by sole proprietorship concern are as follows: 

  1. Income tax return annually that is required by Income-tax Act, the proprietor, and sole proprietorship are not a different person in eyes of law therefore only single income tax return is to be filed. 
  2. GST return only if the GST registration is valid under GST Act. 
  3. Sole proprietorship needs to deduct TDS as per the rates given Income tax rules and also file TDS returns. 

Timelines for Sole Proprietorship Registration 

A sole proprietorship concern is to register itself under Shops & Establishment Act along with the prescribed fees. Duration & Procedure for such registration will vary from one state to another. 

The Sole Proprietorship entails opening a bank account for a business it needs to run. This would take a day or two days of tenure and require a Certificate of Registration under the Shop and Establishment Act of the respective state. 

The registration process under Shops & Establishment Act and GST Registration is subject to departmental clearance and hence varies from a week or two-week time period.  

Checklist 

Following is the checklist for sole proprietorship and the following things should be checked once before getting the registration: 

  • PAN Card of the proprietor. 

  • Name and address of the business to be registered. 

  • Bank Account in the name of the business. 

  • Registration under the Shop and Establishment Act of the respective state. 

  • Registration under GST (if the business turnover exceeds Rs.20 lakhs). 

Documents Required to Sole Proprietorship Registration

The document that is required for registration of sole proprietorship online are enumerated as follows: 

  1. The foremost document is the Aadhar card of the owner. 
  2. PAN card of the sole trader. 
  3. Registered office proof that is if rented property, rent Agreement, and No objection certificate from a landlord. And if self-owned property, electricity bill, or any utility bill or sale deed.  
  4. Bank account of the business concern.  

FAQs

Registration Fees for shop act license or Gumasta license is based on the State and Number of employees. No charges are levied for GST registration fees under the act.

What documents are required for GST registration for a sole proprietorship? The following documents will be required: Photo of the promoter or owner. Email address and PAN card. Legal ownership document when the Place of Business is owned by the proprietor or Rental Agreement in other cases. Electricity bill. Property tax receipt. Aadhar card and bank statement.

How to get GST registration for a sole proprietorship? Step 1: Generate TRN, which is a temporary reference number. Step 2: Open the registration application after the specific time gap given along with TRN. Step 3: Fill out the application and details about the business, proprietor, place of business, HNS code for goods and services, Aadhar Verification, etc. Step 4: The application will be processed through Aadhar authentication. Step 5: ARN number will be provided which will indicate that your details have been received by the tax authority for verification. Step 6: Once the application is approved, the credential will be provided by email and the proprietor will be able to download the GST certificate.

Since there is no mandatory obligation to take registration for sole proprietorship therefore there are no such forms named as registration forms of a sole proprietorship.

Some advantages are less compliance, ease to start a business, cost-efficient, absolute control, and ease of closing a business.

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