One of India's most popular types of business setup is sole proprietorship registration. A sole proprietorship is a business that just one person starts. Read this article and learn about how to register a proprietorship firm.
In India Registering a Proprietorship Firm in India, is a single-person firm or one-person corporation in which a person independently owns, operates, controls, implements, and carries out their enterprise. It is the simplest way to conduct business in India because any laws do not primarily control it. It is not necessary to register as a sole proprietorship, but some persons choose to do so to profit from tax advantages. Only one person owns the corporation or business, and they both share in the profits and losses. So in this article, you will get a brief idea about how to register a proprietorship firm in India.
What is a Sole proprietorship Firm?
A sole proprietorship firm is a business owned and operated by one individual. Additionally, this business has nominal registration fees and the most negligible compliance and other requirements. A sole proprietorship business cannot be officially registered, nevertheless. As a result, you can get additional government licenses and authorizations to demonstrate the legitimacy of your company.
Benefits of Proprietorship Firms
1. Easy Start
There isn’t a complicated registration procedure to set up proprietorship companies. A proprietorship business makes use of the owner’s legal name. This clause prevents the firm from being registered unless it is required. This simple registration process benefits entrepreneurs by making it more straightforward to write their businesses.
2. Modular Operational Approaches
Being a business’s sole proprietor makes comprehending and running the same simpler. The sole decision-maker is the owner. As a result, the organisation benefits from a quicker and better decision. Businesses with a single owner typically operate more simply since only one person is responsible for developing and carrying out the company’s strategies.
3. Undistributed Gains
Since there is just one proprietorship owner, there are no guidelines for how much money the business may make. The proprietor is the only one who can amass earnings and then invest them further in the industry and other endeavours. Conflicts within the company linked to benefits are eliminated by sole ownership. The company receives funding to support and sustain its procedures.
4. The taxing
If a Sole Firm Online business makes just under ₹2.5 lakh in annual profits, they are not required to pay income tax. The company’s decision to start small & economize on taxes has substantial advantages. It is important to remember that the company must pay income taxes whenever its annual profits surpass ₹2.5 lakh.
These are a few significant advantages of running a single proprietorship business. Having a proprietorship company might help with loan applications for business capital investments.
How to register a proprietorship firm In India?
The procedure for registering a proprietorship firm is as follows;
- Step 1 is to obtain a PAN
To be able to operate your firm, you must apply to the government for a Permanent Account Number or PAN.
- Step 2: Give your company a name
Always choose a name for a business firm that expresses the nature of your company and is distinctive. Additionally, you must ensure that no other company is already using the name you intend to utilize.
- Step 3: Registering an entity and opening a bank account
The next step is to create a current bank account in your entity’s name. However, since formal registration is not required, you are free to apply for additional government permits under the regulations that apply to your particular line of work.
- Step 4: MSME registration
You can register as an SME or an MSME under the Micro, Small, and Large Enterprises Development Act of 2006, which is not required. Getting written under the MSMED Act would enable you to take advantage of government programs for such businesses.
- Step 5: Registering for GST Online
If your company’s annual revenue reaches the state-required threshold, you can also register for GST: https://www.gst.gov.in/
Proprietorship Firm Registration Process
1. Registration of MSME
An MSME (Small and Medium Enterprise) certification is not required, but it increases a company’s prospects of obtaining financing and provides assistance in other legal concerns. On the official MSME website, there is an online registration method available for MSME registration. The sole owners will find this approach to be straightforward and convenient.
2. License under the Shop & Establishment Act
Not all single proprietorship businesses are required to have a Shop & Establishment Act license, although the majority of them do, under the regional regulations that govern the industry. The municipal party issues the assignment for shops and establishments. The quantity of employees in a corporation determines how many of these licenses are granted. Business owners must visit the individual state-specific website for registration as the registration process varies by state.
3. Registration for the Tax on Goods and Services (GST)
Only if an organization’s yearly revenue exceeds ₹40 lakh or ₹20 lakh for companies operating in North-Eastern regions is registration for the Goods and Services Tax required. A GST-registered identity is crucial if a business owner wishes to sell goods online through e-commerce websites like Amazon, Flipkart, eBay, and others. It is essential to remember that single proprietorship businesses are not required to register for GST.
4. Office Address Verification
For some processes necessary for the operation of the firm, a registered agent address evidence is required. The rental agreement and a NOC from the office’s landlord may be used to verify the office address if the office is in a rented space. If the business owner has an office, the municipal corporation’s power bill or any other business ownership documents might serve as confirmation of the office address.
Conclusion
In India, a sole proprietorship is a business structure where the owner, manager, and proprietor are all the same individual. This person has the right to share the company’s earnings and is fully accountable for any losses. However, the biggest drawback of this structure is that the entity is not distinct from the individual. Furthermore, the entity’s very existence is in jeopardy due to any issues with the ownership or the death of the owner. This is why many business owners consider company registration to provide more security and continuity for their business.
