Planning to start your own business as a sole proprietor? Know various methods for creating a sole proprietorship in India and the importance of sole proprietorship registration for your business.
Sole proprietorship or individual entrepreneurship is considered one of the most accessible and minimal forms of starting a business. There will be no partners here since there is only one owner known as a sole trader. The sole trader has exclusive ownership over the business. Unlike in the corporate company and LLC, the concept of a ‘separate legal entity will not apply to the sole proprietorship. Hence the sole proprietor and business are deemed as one and not different. This implies that the business assets and liabilities are also the trader’s assets and liabilities. Let’s see the various methods for sole proprietorship registration.
If you want to start your business as a sole proprietor, you have various options to kickstart your business and make it successful. You can choose from popular types of sole proprietorship such as business owner, freelancer or contractor, franchise owner, etc.
With your knowledge and expertise in a specific area, you can create a sole proprietorship that can thrive and support your career. However, before starting your business as a sole proprietor, it is of most importance that you get the sole proprietorship registration.
Although there are no governing laws for a sole proprietorship, it is recommended to register your business for various benefits and opportunities. If you are a small business owner or a prospective sole trader, check out this informative blog regarding multiple methods to create and register your sole proprietorship in India.
3 Methods for Sole Proprietorship Registration in India
Becoming a successful entrepreneur has never been so easy. Now you can start and run your sole proprietorship in an effortless and hassle-free way. Here are three methods for hassle-free sole proprietorship registration in India. Read till the end and pick the suitable form of registration best for your business performance and success.
The three methods to register your proprietorship firm registration in India are as follows:
- Under Shop and Establishment Act
- Obtaining Udyog Aadhar under the Ministry of MSME
- GST Registration
Sole Proprietorship Registration Under the Shop and Establishment Act
Under the Shop and Establishment Act, business owners possessing shops and establishments can register their sole proprietary concern. Here, the term ‘shops’ scope covers the broader area and has exceptions to it.
According to the Shop and Establishment Act, the establishments that are considered ‘shops’ are:
- In which the sale of goods is executed either by wholesale or retail, or
- In which the sale of services is offered to the customers, or
- And includes a store room, warehouse, office or workplace, irrespective of the premises used for the conduct of a business/trade.
The exceptions to the term ‘shop’ include these business forms where these are not considered as ‘shop’ for the Shop and Establishment Act:
- Residential Hotel
- Restaurant
- Eating House
- Commercial Facilities
- Cafeterias
- Theatres
- Other Public amusement or Entertainment Locations.
Noteworthy Points for Registering Sole Proprietary Concern under Shop and Establishment Act
- If your business satisfies the ‘shop’ definition under the Shop and Establishment Act, the application for your business registration should be forwarded to your local municipal corporation of your concerned city.
- However, the applicable laws vary from state to state. It is recommended to verify the appropriate provisions that apply to your state and proceed further.
- Before applying for the registration, ensure you possess important, relevant documents essential for successful registration.
- Following the registration process and compliance with regulations, the registration certificate should be displayed within the business premises and renewed as prescribed.
Sole Proprietorship Registration by Obtaining Udyog Aadhaar Under the Ministry Of MSME
A sole trader, if wishes, can obtain Udyog Aadhaar like any other company and partnership. The Udyog Aadhaar is a unique identification number given by the Ministry of Micro, Small and Medium Enterprises (MSME). This Udyog Aadhaar comes with many benefits such as bank loans, reimbursements, subsidies, etc., which significantly support small business owners.
Although the Udyog Aadhaar is a newer method than other procedures, this brings a unique identity for your sole proprietary concern. This new method replaced the older methods like EM-I and EM-II forms. Any prospective and new traders and independent entrepreneurs can register as MSME by following a simple registration process and obtaining massive support for their growing business. Here, the registration process for Udyog Aadhaar can be done online by visiting the website https://udyamregistration.gov.in/UdyamRegistration.aspx. After submitting your form with relevant documents and required information, one will receive the message for successful form submission and pertinent details.
Sole Proprietorship Registration through GST Registration
A sole proprietorship is the simplest form of business which requires almost any capital. It is also famous among individual owners and sole traders because of the fewer compliances and regulations. However, if you decided to register your sole proprietary concern through GST registration, then it should be noted that there will be a drawback. A sole proprietorship registered under GST should go through many compliance procedures and mandatorily meet all the requirements like collecting GST from customers, filing GST returns, following prescribed dates, etc.
GST replaced the old VAT, service tax registration, and other repetitive taxes. In GST, the owner can also get benefits like no cascading effect of taxes, the option for claiming input tax credit (ITC), and many more. So, you can choose GST registration for your sole proprietorship if your business turnover is more than 20 lakhs. Also, GST registration is the widely accepted form of registration even among banks for opening a bank account in the name of your sole proprietary concern. However, if your business turnover is less than 20 lakhs, it is advised not to get a GST registration even though you have an option to register where one has to go through added compliances.
Is The Sole Proprietorship Registration Compulsory?
The simple answer would be ‘no.’ The registration for your sole proprietary concern is not mandatory and optional. Whether you register your business concern, it is optional. If you are planning to open a bank account in the name of your sole proprietorship, it is recommended to get registered.
Conclusion
These are the various methods for sole proprietorship registration in India. If you want to register your business concern, consider your business needs and day-to-day operations to arrive at the best registration method. The type of registration also impacts the business and its performance. Refer to the above methods to get clarity on different registration methods. Get your sole proprietary concern registered with a professional lawyer team and legal experts for a seamless registration experience.
