Sole Proprietorship Business: The Easiest Way To Run A Business Organization By Priyanka - March 13, 2020 Last Updated at: Dec 10, 2020 3674 The NCLAT, in an order dated 25th February, 2020, clarified that a Sole Proprietorship Firm is eligible to file an 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. Sole proprietorship simply stands for single ownership and is the most opted form by all the businesses. Run by an individual, the sole proprietorship business does not require any separate legal entity. Under this all the legal actions and transactions are taken under the name of the owner, and not separately for the business, making it the most suitable option for starting a business organization at a small scale. The most common example of a sole proprietorship business is the grocery store next to your house or even a doctor, as these are completely managed by a single person without the involvement of any legal entity. These businesses are not liable to any sort of legal registrations. However, the proprietorship firm is not limited to growth. As time passes, and the business grows, the individual can get the firm registration done and associate it with the legal entities. Features of a sole proprietorship firm How to start a sole-proprietorship business Registering a sole proprietorship firm Documents required for sole proprietorship business registration Conclusion Features of a sole proprietorship firm Planning to form a sole proprietorship business? Have a look at the features and what it exactly holds, and whether it is the most suitable option for you or not. The features of a proprietorship firm are as enlisted below: Liability: The business owner is completely liable for all the gains and losses of the proprietorship firm. Whether it be paying the loan or other transactions, if the individual fails to manage the finances, they will have to keep their personal assets at risk for the business and will be answerable to the law. Legal formalities: To form a sole proprietorship business, they are hardly any legal proceedings and requirements involved, allowing carrying out of the business with ease and minimum legal risks. Identity of business: The business identity is that of the owner, being completely responsible for all the tasks being carried out, without any specific accounts and finances under the name of the business. Continuation of the business: To form a sole proprietorship is not an easy task, as it is completely reliant on the owner. In case of any mishap with the owner, the maximum possibility comes down to the point of the ceasing of the business. How to register a Sole Proprietorship Business Here are the ways to register a Sole Proprietorship Business Draft a business plan Build your credit Obtain necessary licenses and permits Register a business name (which we have elaborated in the next point) Open a bank account Do the preparation for tax season Reduce liability register for a sole proprietorship Registering a sole proprietorship firm Even though it is not mandatory to register the business to form a sole proprietorship firm, but, it is recommended to get it registered for the smooth functioning and easy expansion of it in the future as well. The ways in which the firm registration can be done include the following: Small and medium enterprise (SME): Most of the start-ups and small scale businesses opt for this type of firm registration, under the MSME Act. Registering under this is of benefit, as the government offers various schemes for SMEs. Shop and establishment act license: The municipal party is responsible for the issuing of this license, and is provided to the individuals as per the laws. GST registration: This type of firm registration is for the businesses with a turnover of over 20 lacs, and those seeking to expand their business. Documents required for sole proprietorship business registration Registering your business for sole proprietorship business ain’t a tough deal. To register your firm, the documents required for sole proprietorship include the following: Aadhar Card: It is one of the most important identity proofs for an Indian resident. Without the linking of the Aadhar card with the various accounts, the individual can’t carry out the legal proceedings. PAN Card: Filing of income tax return is not possible without a PAN card. And, further, the PAN card must be linked with the Aadhar card, making both of them mandatory documents required for a sole proprietorship. The application for the PAN card can be done online, with a nominal fee. Bank Account: For all the financial transactions, it is important to submit the bank account details. It is important to have the correct address proof and identity proof and is recommended to get a separate account for the business. Office Proof: Whether rented or self-owned, it is important to provide the right documents for the registered office. As such, for better functioning of the business, it is recommended to get the business registered with the above-mentioned documents for a sole proprietorship. Here you go for the benefits of sole proprietorship? Conclusion As such, with all the mentioned features and ways of registration, you can easily register your firm as a sole proprietorship with the only limitation that the owner is solely responsible for all the happenings of the business.