Ways to Register Sole Proprietor Firm in India

How to Register for a Sole Proprietor Firm in India without much hassle? This article guides you through the process of registering for Sole Proprietor Firm in India, there are three ways to register a sole proprietorship: The Shop and Establishment Act requires you to register. Obtain an Udyog Aadhaar through the MSME Ministry. Become GST registered.

Most business people prefer to start a small-scale business as a Sole Proprietor Firm. The primary characteristics of this business type clearly distinguish it from others. It necessarily requires a remarkably simple procedure with minimal legal requirements and formation costs. Most local offline businesses prefer sole proprietorship.

It is preferred over others because of its unique features, it is owned by a single person, due to this, there are minimum legal and tax-related compliance requirements and it is extremely easy to start and end a firm.

There are three ways to register a Sole Proprietor firm in India: 

1. Registering under the Shop and Establishment Act
2. Getting a Udyog Aadhaar (or) Udyam under the Ministry of MSME
3. Registering through a GST registration

Registering under the Shop and Establishment Act

The requirement to register under the Shop and Establishment Act is to own a “shop” as a place of business, The following are considered as a shop; 

1. A place where customers are served.
2. Include an office or anything related to the business.

If you meet any of the requirements, you can apply for a sole proprietor firm at a local Municipal Corporation in your city.

To register under the Shop and Establishment Act, within 30 days of starting any work in your shop/establishment, submit an application in the prescribed form to the Inspector of the area. The application must be submitted with the fees and should have the following:

• Employer’s (your) name and the manager’s name (if any)
• The address of your shop/Establishment
• The name of your Shop/Establishment

After receiving your application, the inspector will go through the application form and check the accuracy of the application, if satisfied, he will enter the details and issue a registration certificate, this registration certificate of your establishment is valid for five years and will have to be renewed after.

Getting a Udyog Aadhaar (or) Udyam under the Ministry of MSME

The difference between Udyog Aadhar and Udyam is Udyam registration allows one person with an Aadhaar card to register for one firm but whereas with Udyog Aadhar you can register multiple firms instead of only one using a single Aadhar card. Udyam registration is the new way to get registration for MSME and is an improved version of Udyog Aadhaar registration.

The primary reason for introducing Udyam was to make the registration process simpler and faster. The Udyog Aadhaar Memorandum (UAM) was a procedure that allowed industry to be registered by simply filling out a one-page form provided by the MSME Department of India.

A Udyog Aadhaar is a unique identifier provided to business owners by the Ministry of MSME. A sole proprietor, like any other entity such as a company or partnership, can apply for Udyog Aadhaar. 

A Sole Proprietor Firm owner, unlike other business entities, does not have formal recognition of his business. Udyog Aadhaar is highly recommended for Sole Proprietor Firm who do not have official govt recognition because it allows a sole proprietor to obtain a unique identity and official registration with the Government of India, which affirms the existence of his business. To register for Udyam or UAM all you need to do is follow the steps below:

Steps to apply for Udyog Aadhar or Udyam

1. Go to the registration website of the Govt. of India’s Ministry of MSME Registration. 
2. Choose the right option depending on your requirement and what you want to apply for
3. Enter your Aadhar number – you’ll receive an OTP
4. Enter the OTP you received and continue filling out the form

The form will consist of the following, make sure you have them already;

• Aadhar Number
• Name of Owner 
• Social Category
• Gender
• Physically Handicapped
• Name of Enterprise
• Type of Organization – Could be any of the following
• Proprietorship
• Partnership Firm
• Hindu Undivided Family
• Private Limited Company
• Co-Operative
•  Public Limited Company
•  Self Help Group
• Others (Limited Liability Partnership)
• PAN Number
• Location of Plant
• Official Address
• Date of Commencement 
• Previous Registration Details
• Bank Details 
• Major Activity
• NIC Code
• People Employed
• Investment in Plant & Machinery or Equipment
• Details of District Industry Center

5. Submit your application, and you’ll get another One-Time Password, enter that and the captcha on the screen, and you’re good to go!

Registering through a GST Registration

GST registration is another option for registering your sole proprietorship. If you engage in any type of exchange of goods and services, you can apply for GST registration. It has taken the place of the previous VAT and service tax registration. If your turnover is less than 20 Lakhs in a financial year, it is not mandatory to get a GST Registration, as it would just be unnecessary compliance that you could have avoided by not applying. Incorporating GST registration as part of your proprietorship company registration ensures that you are compliant with current tax laws, streamlining your business operations.

However, if your turnover is more than 20 Lakh in a financial year GST registration becomes mandatory. There are other cases in which GST Registration is mandatory, here’s a list of the cases;

• You supply goods through any means, e-commerce, inter-state trade and export.
• You’re a/an
• Service Provider
• Agent for Registered Person
• Casual Taxable Person
• Input Service Distributor
• TDS/TCS Deductor
• E-Commerce operator
• OIDAR
• You’re registered under any of the Indirect Tax Laws

Steps to apply for a GST Registration

1. Go to GST’s registration webpage;
2. Choose “New Registration”;
3. Fill in the form;
4. Complete OTP Verification;
5. Submit your registration form.

Here are some things you should know before you apply for GST Registration;

1. If a person operates from multiple states, he must apply for GST Registration separately for each state in which he operates. It is not possible to apply for a centrally controlled GST registration.
2. A person with multiple businesses can apply for a single GST Registration or one for each business separately.
3. Filing GST Returns is required if you have a GST Registration Number.
4. A person who does not have GST Registration cannot collect GST from his customers or claim Input Tax Credit.

The downside of Sole Proprietorship

The major downside of a sole proprietorship is that it is not governed by any law that protects the rights of a sole proprietor. The proprietor is personally liable for all of the company’s debts and liabilities. If the company does not have enough assets to cover its debts and liabilities, the owner will be personally liable. His personal information can be used to settle external claims.

Conclusion:

There are many ways to register a Sole Proprietor firm in India. You can choose any of the following methods, but if you’re unsure of what to do and unable to decide which option to choose, you can use Vakilsearch to get your Sole Proprietor firm registered. We also specialize in company registration. Get in touch with us to know more.