What Registrations A Sole Proprietorship Needs By Vikram Shah - March 21, 2018 Last Updated at: Jul 06, 2021 16187 If you decide to operate as a sole proprietorship, you will not need to set up or register a separate legal entity, although you will need to register with Sars for the applicable taxes. Sole Proprietorship is a business or an establishment which is run by a single person. He or she, in whose name the business is run, is responsible for the enterprises. Most people unfamiliar with the concept of ‘Sole Proprietorship’ believe they require a registration for it. However, no registration is required for opening up a business under ‘Sole Proprietorship’. What you need, instead, is any government registration applicable to your business. It could be GST Registration or an Importer, Exporter Code (IEC). Any one of these would be sufficient to start and run your business as a sole proprietor and to also open a current account which is mandatory for any enterprises. register your sole proprietorship Why No Sole Proprietorship Registration? A proprietorship is an extension of its owner, the proprietor. In your absence, it ceases to exist. This is why a sole proprietorship, unlike a one person company (OPC), has no perpetual existence. Such a business has a few advantages – it’s easy and inexpensive to start and only a few compliances are to be met on an annual basis. It, however, has one major flaw. Proprietors must accept unlimited liability, since no legal difference exists between the person and the company or business. What this means is that in case your business cannot repay all its debts, your creditors can recover their money from your personal possessions. With other business formations, like in case of a partnership firm, this is not the case, since the liability is shared by all the stakeholders. For this reason, only smaller businesses should continue under sole proprietorship. Opening a Bank Account Opening a current account is a mandatory aspect of any business. You need all the registrations that apply to your business, but any two of the below mentioned registrations would be enough to get you a current account as per KYC norms set by the RBI: GST registration and returns: This registration applies to all businesses in India. GST is a tax collected by the central government. If you sell goods worth over a certain amount a year (Rs. 20 lakh) you must be registered. You must then do a monthly payment and filing. A commercial space is required for this license. Once registered, you will be allotted a GST number. Shops & Establishment Act License: The municipal authorities of all states require businesses to have an Shops & Establishment License. This is a lifelong license that must be obtained once for all places of business, even if you are operating from home. The Shop and Establishment Act license are given by the Department of Labor in the individual States and it puts certain conditions/clauses for employers pertaining to conditions of work and the list of rights for the employees. Each shop or business establishment needs to register itself for Shop and Establishment Act, irrespective of the number of employees or lack of it. Most banks will not open an account for your business without this license, since it forms as a proof of your business establishment. Profession Tax Registration: A business with employees needs a professional tax registration within 30 days of commencement of the business in some states. It again varies from State to State. A list of State that requires this registration can be obtained from the link. Professional tax returns must also be filed every year and is capped at Rs.2500, per annum. IEC: An IEC is to be issued to all importers and exporters. You can apply for an IEC as an individual or as in a partnership firm, dealing with import or export of goods. IEC is only applicable when your business involves import or export of products and not for service or technology based industries. So if you are running such a business, you would need to get it before you can start operating. MSME Registration: MSME is the abbreviation for Micro, small and medium enterprises. Hence, any enterprises that fall under this category needs to file for the registration. Both service and manufacturing businesses can apply for an MSME Registration, which gives small businesses huge benefits. Some of the benefits include – Lower interest rates for business from the banks, Subsidies in Tax, electricity consumption subsidies, and many more. The businesses eligible to obtain MSME registration should have invested less than 10 lakhs in machinery and plant for manufacturing industries. For service industries, any investment less than 5 lakhs in plant and machinery is eligible to obtain MSME registration. Other: An IT return or utility bill in the name of the proprietorship or a license issued by the Institute of Chartered Accountants of India, Indian Medical Council or Institute of Company Secretaries of India would also do.