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Sole Proprietorship

How to Register a Sole Proprietorship in India

Did you know you can opt for sole proprietorship registration in India using three easy methods? Know the steps for registering through the Shop and Establishment Act, through Udyog Aadhaar under the Ministry of MSME, and GST registration, and choose the one that suits the best according to your needs.

A sole proprietorship is an unincorporated business in which the only owner of the business is subject to pay personal income tax on any profits earned from the business. Unlike other forms of cooperations, such as limited liability partnerships and limited liability companies, the business’s debts are also the owners’ debts in a sole proprietorship.

Setting up a sole proprietorship is so effortless that it has become one of the most popular forms of a business entity, particularly among small business owners and contractors.

In India, you can register a sole proprietorship using three methods:

  1. Using Shop and Establishment Act
  2. Through Udyog Aadhar under the Ministry of MSME
  3. Through GST registration.

We have discussed these methods in detail ahead for you to choose the one that suits your business the best.

Methods to register Sole Proprietorship

1. Sole Proprietorship registration under Shop and Establishment Act

The Shop and Establishment Act allows sole proprietorship registration for shops and establishments. Firstly, we must note which entities are shops. 

Under the law, factories, cafeterias, residential hotels, restaurants, commercial facilities, theatres, residential hotels, or other public entertainment locations are not considered shops.

Premises that qualify as a shop are:

  • If the goods are sold, either wholesale, retail 
  • or services are offered to the customer
  • This includes offices, warehouses, sheds, or workplaces used in connection with such business, whether on the same premises or elsewhere

The Act’s rules vary from state to state, so it is highly advisable to check for provisions of the Act under the registrar’s office of the state where the shop is. The general process of registration is as such,

  • Each state’s labor department is responsible for processing and registering Establishment Acts
  • The process of registration is handled by an inspector in charge
  • Generally, the district labor officer takes charge as the inspector in charge
  • The inspector will provide a registration form to the owner
  • The following information about the employer and establishment should be included:
    -Name of the owner
    -Establishment’s name
    -Address of the business
    -Number of Employees
    -The day that the business opened for business
    -Category of the business
  • The owner should send the application and registration fees to the inspector in charge within 30 days of establishment
  • The process of verification by the inspector takes about 10-20 days
  • The owner will receive the registration certificate if the registration meets certain requirements put forth by the inspector in charge
  • The registration certificate must be displayed within the premises and renewed periodically.

2. Sole Proprietorship Registration through Udyog Aadhaar under the Ministry of MSME

The Ministry of Micro, Small & Medium Enterprises (in short, Ministry of MSME) issues Udyog Aadhaar, which are special identification numbers, to business owners. A solo owner can apply for a Udyog aadhaar with the ministry.

Compared to other methods, the Udyog aadhar is a relatively newer method. Previously, EM-I and EM-II forms were used to register businesses, but the Ministry of MSME has now replaced those methods with the Udyog aadhar.

When a sole proprietor registers with the Ministry of MSME, he or she becomes eligible for benefits such as bank loans, subsidies, and reimbursements, among other things. He also benefits from obtaining a unique identity for his company, which is known as Sole Proprietorship Registration.

The process of registration of Udyog aadhar is quite simple. New Entrepreneurs who are not registered yet as MSME can follow these steps to register:

Step 1: Visit the website

Step 2: Fill in your Aadhaar number (aadhaar number of the owner of the business)

Step 3: Fill in your name as on your Aadhaar card (Name of the owner of the business)

Step 4: Click ‘Validate & Generate OTP’. You will receive OTP on your phone linked to your Aadhaar card

Step 5: Enter the OTP received on your phone number

Step 6: Choose your type of Organisation among the choices given

Step 7: Enter the PAN number of the owner

Step 8: Validate your PAN number by clicking “PAN Validate”

Step 9: Then, fill out the details asked in the form. Note: Most of the details will get automatically filled using your Aadhaar and PAN details

Step 10: Click “Submit & Get Final OTP”

Step 11: Fill in the OTP received on the phone number and the verification code being shown on the screen.

After submission, you will receive a message that you have successfully submitted your form and will receive your Certificate on verification and completion of the registration process.

3. Sole Proprietorship Registration through GST Registration

If you are dealing with the exchange of goods and services, you can do sole proprietorship registration through GST registration. Previously, VAT and service tax registration was required, and it is now done through the business’s GST registration:

It is a great way to obtain sole proprietorship but has some drawbacks. A business registered using this method must comply with all GST requirements, and after collecting GST from customers, they must file GST returns.

Steps to apply for GST registration:

Step 1: Visit the website

Step 2: Go to the GST Portal, by – > Services > Registration > New Registration option.

Step 3: Select New Registration Option and fill in the form details.

Step 4: Click Proceed and then opt for OTP verification. You will receive OTP on mobile and email filled out in the previous step.

Step 5: You will be given a TRN. Use this TRN to login into the GST portal.

Step 6: Fill in all the required details step by step.

Step 7: After filling in all the details and submitting the documents required, you can proceed to submit.

Step 8: The application will now be verified. You shall be sent an Application Reference Number through phone or e-mail address. You can use this number to track the status of your GST application.

Documents required for registration

The documents required for registration may vary according to the procedure you choose for registering a sole proprietorship, but majorly the below-listed documents will be mandatory for any of the methods.

  • Aadhaar card
  • PAN card
  • Bank Account
  • Registered office proof (Rent agreement for a rented property or Electricity or utility bill for the self-owned property.

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