Your simplest guide to learning about proprietorship firm registration. Know everything from eligibility and significant documents required to the process of sole proprietary firm registration in India.
Introduction
India is becoming the start-up hub as thousands of start-ups are booming each year. One of the famous and effortless forms of a start-up is sole proprietary firms. With the ever-increasing popularity of sole proprietorships and MSMEs, various small merchants and passionate entrepreneurs are looking forward to launching their creative and fresh business ideas by registering as a sole proprietary concern.
Being a huge boost to the economy, these MSMEs provide employment opportunities at large and play a vital role in the industrialization of rural and remote areas. If you are a passionate small business owner looking to register your business, check out this blog to get familiarised with the proprietorship firm registration process, various methods available for registration, documents required, and everything in between.
What Is the Eligibility for Proprietorship Firm Registration?
As there are no governing laws for the sole proprietary firms, sole traders will get various benefits like minimal compliance, effortless setting up of business, various deductions, and more, unlike corporate companies and LLPs. But who is eligible for registration under this business form?
Anyone can register their business as a sole proprietary concern considering they are an Indian citizen having a current account in the name of their business. This covers the scope of eligibility area and still wondering if it is mandatory to get a sole proprietorship registration.
Registration can be mandatory or optional based on the type of business you are going to establish or already established. If you are planning to open a current account, verify your bank’s requirements since most of the banks require Shop and Establishment registration.
Significant Documents Required for the Proprietorship Firm Registration
Depending on your chosen registration method, the required documents may vary for getting your sole proprietorship registered.
There are three methods for registering your sole proprietary firm such as:
- Shop and Establishment Act registration
- Udyog Aadhaar Registration or Udyam Registration
- GST Registration
However, the below-mentioned significant documents are common and compulsory for any registration method. Documents required for sole proprietary concern registration are as follows:
- ID proof
- Address
- Aadhaar Card
- PAN Card
- KYC documents
- The rental agreement for registered office proof
- Sale deed or utility bill for the self-owned property.
Documents Required for the Current Account Opening
- PAN card
- ID proof ad Address
- Proof of the existence of business
- Shops and Establishments Act Registration
Procedure for Proprietorship Firm Registration Under All the Three Methods
As mentioned above, three registration methods exist to get your proprietary concern registered in India. Here we explained each of the registration processes in detail, along with the necessary steps involved. Refer to this step-wise procedure under each of the three methods and pick the registration method that suits your business well.
Proprietorship Firm Registration Under Shop and Establishment Act
Under the Shop and Establishment Act, 1963 registration, any sole trader can register given the place of business comes under the term ‘shop’ scope.
For the purpose of the Shop and Establishment Act, of 1963, the term ‘shop’ includes any premises that either sell goods, whether by retail or wholesale, or services to customers. It also takes into account the premises like godown, store-room, office, warehouse, etc., used for the conduct of the business.
The term ‘shop’ does not cover hotels, theatres, cafés, factories, commercial facilities, other public entertainment locations, etc.
Steps Involved in the Proprietorship Registration Process Under Shop and Establishment Act
- It is recommended to refer to each state’s laws as they can vary from state to state
- The state labor department is responsible for registering establishment acts
- The inspector in charge handles the registration process
- The registration form should include crucial information such as owner name, business name and address, employee count, business opening date, and business category
- The registration application, along with relevant documents and fees, is to be sent by the owner within 30 days of the opening of business
- After 10-20 days of the verification process, the owner will receive a registration certificate from the inspector in charge
- The owner should display the registration certificate within the premises and renew it when required.
Proprietorship Firm Registration Through Udyam Registration
Udyog Aadhaar Registration is a new registration method provided by the Ministry of MSME. Since MSMEs are the backbone of socio-economic growth, the government came up with this registration to support and encourage MSMEs throughout the nation. There are also various benefits provided under this registration, and the registration process is also easy.
Steps Involved in the Proprietorship Registration Process Under Udyog Aadhaar Registration
- Visit the website https://udyamregistration.gov.in/UdyamRegistration.aspx
- The first step you will see is ‘Aadhaar Verification with OTP.’
- Fill in your Aadhaar number along with your name and click validate & generate OTP
- The OTP will be sent to the phone number that is linked to your Aadhaar card
- Enter the OTP within the given time, if any
- Fill in the necessary details related to the business and owner, such as organization or business type, PAN number, etc
- Click ‘validate PAN’, and your PAN gets validated successfully
- Fill in any other details asked. Here, since your Aadhaar and PAN are submitted, most of the details will get auto-filled
- Finally, click ‘submit and generate final OTP.’
- Fill out the OTP accordingly, and you will receive a message regarding the successful form submission along with other relevant details
- The final registration certificate will be sent to the owner upon the successful registration process verification and completion.
Proprietorship Firm Registration through GST Registration
GST registration is a popular and widespread form of identity for most of the most of issues. It also comes with added compliances. If you are a sole trader planning to opt for GST registration, you have to collect GST from customers and file timely GST returns. However, GST registration comes in handy when you want to open a current account with your bank.
Steps Involved in the Proprietorship Registration Process Under GST Registration
- Visit website https://www.gst.gov.in/
- The GST portal appears on your screen. Visit the above link > Services > Registration > New registration option
- Select the new registration option and fill in the necessary details accordingly
- Click proceed and fill in the OTP send it to your phone or Email
- A temporary Reference Number (TRN) is provided to you, which is used to login into the GST portal
- Fill in the necessary details, if any, and click submit after successful submission of the form along with relevant documents
- The Application Reference Number will be sent to your registered mobile or Email, which can be used to track your GST application status
Which Proprietorship Firm Registration Method Is the Best?
The best registration method among the above three methods totally depends on your business requirements. Before opting for any of the registration methods, make sure to consider your business needs, business goals, compliance requirements, etc., to arrive at the registration method that is best and that helps your business to grow by making significant progress in the relevant industry. However, you can choose the GST registration method when your business turnover is more than ₹20 lakhs.
Conclusion
These are the three methods for proprietorship registration. Refer to the above-given procedures and steps for your proprietary concern registration. Choose the best registration method for your business, and that lets you grow big. Hire expert lawyers and legal attorneys for a seamless registration process.
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