How to Start and Operate a Sole Proprietorship in India?

Last Updated at: Sep 02, 2022
How to Start and Operate a Sole Proprietorship in India_
The NCLAT, in a 2020 order, clarified that a Sole Proprietorship Firm is eligible to file Application Under Section 7 and Section 9 of Insolvency and Bankruptcy Code (IBC).  In the same order, the NCLAT also said that Section 2 of the IBC is applicable for Sole Proprietorship Firm . Further, the definition of “person” in Section 3(23) of IBC is also applicable to a Sole Proprietorship Firm.
  1. What is a sole proprietorship?

  2. How to start a sole proprietorship in India?

  3. Registering a sole proprietorship company in India

  4. How you can register your sole proprietorship with Vakilsearch

No Government registration is mandatory to start and operate a sole proprietorship business in India. You do not need to visit an online portal, fill up forms, and upload any documents to do sole proprietorship registration India. However, we would suggest you do a sole proprietorship registration if you want to avail of the benefits provided by the Government from time to time to the business sector.

In this blog, we will tell you how to register a proprietorship company in India. We will also inform you about the documents required to do sole proprietorship registration. But, before proceeding with how to register a sole proprietorship in India, let’s pose for a minute and have a look at the definition of a sole proprietorship business.

What is a sole proprietorship?

Simply put, a sole proprietorship is a small and independent business owned and managed by a single individual. It is one of the easiest businesses to maintain. This sheer ease of operations makes sole proprietorship businesses very popular across the unorganized business sector, particularly among the small merchants and traders.

In India, a sole proprietorship business is not taxed as a different legal entity. Rather, the business owners file their business taxes as parts of their tax returns. The business income of a sole proprietor adds to his income after deducting the business expenses, tax deductions, and other relevant income, if any, from his gross receipts. Like any other individual assessee, such a business also entitles to receive an income tax deduction. The same will get deducted as per prevailing IT rules and depending upon the slab rates applicable to his taxable income. This is in contrast to the limited companies, for which income taxes are assessed on flat rates.

register your sole proprietorship

How to start a sole proprietorship in India

Starting a sole proprietorship business in India is a fairly easy affair. You just need to take care of the following before thinking of how to open a proprietorship firm in India.

1, Decide on a suitable business name

  1. Choose a suitable location as the designated place of doing your business
  2. Open a current account with any bank, in the name of your business.

Here you go for the benefits of sole proprietorship?

Benefits of a Sole Proprietorship 2

How to register a sole proprietorship company in India

Let’s now understand how to register a sole proprietorship in India. Even though a sole proprietorship business did not require any registration as such, you can get a few registrations to make your business function properly. These are mentioned below-

 SME Registration

You can register your sole proprietorship firm as an SME (Small and Medium Enterprise) as per the provisions mentioned in the MSME Act. You file applications online as well. Even though SME registration is not mandatory for sole proprietorship firms, we would recommend you to do this as it will facilitate you getting bank loans, should you need any in the future. The Government also runs several schemes to benefit the SMEs where loan grants to them low-interest rates.

Discover the GST rate, HSN code, or SAC code for all goods and services by using our GST rate finder service. This finder service is also known as the HSN code finder. For products and services, GST is calculated on the basis of an item’s HSN or SAC code.


Shops & establishment registration

The shop and establishment license covers all business entities such as shops, restaurants, commercial establishments, retail trade/businesses, benefit making organizations, public amusements, and so on. Irrespective of any business establishment you start, you need to register it within 30 days, whether it is fully functional or not. The local municipality issues this license depending on the number of employees in an establishment.

You should register your firm and obtain such a license as it gives you the right to do business in your location or in your state. Also, it will give you the ease of opening a current account with any of the banks. With shops & establishment registration, you can avail beneficiary schemes from the State DIC Department as well.

 GST registration

GST is a multi-stage tax, charged at every point of sale. It has replaced many indirect taxes such as the service tax, Value Added Tax (VAT), central sales tax, excise duty, additional customs duty, and so on. Any person/business making inter-state supply of goods & services and having an annual turnover of over 20 lakhs (40 lakhs in certain states) is mandated to have GST registration.

A GST registration makes a business legally recognized as a supplier of services or goods. Besides, small businesses can utilize the composition scheme provided by the GST regime to lower taxes. Thereby, they can reduce their taxation and compliance burden significantly.

GST registration is mandatory for certain types of businesses. As per the GST Act, penalties are applicable if a business operates without having a GST registration.

How you can register your sole proprietorship with Vakilsearch

You can register your sole proprietorship with Vakilsearch in 3 simple steps:

  1. We help you pick the right company name
  2. Further, we file an application on your behalf
  3. We offer you persistent support until you receive your registration.