What is a Sole Proprietorship?
When a business is owned and governed by one person, it is called a sole proprietorship company. This type of business can be incorporated in fifteen days and hence makes it one of the most popular types of business to begin in the unsystematic sector, specifically among merchants and small traders. For a Sole Proprietorship business, registration is not required as it is identified through alternate registrations, such as GST registrations. However, its liability is unlimited and it also doesn’t have perpetual existence.
Checklist Items for a Sole Proprietorship Registration
- A certificate/license issued by Municipal authorities under the Shop & Establishment Act.
- The license issued by Registering authorities like the Certificate of Practice is issued by the Institute of Chartered Accountants of India.
- The registration/licensing document is issued in the name of the proprietary concern by the Central Government or the State Government Authority/ Department, etc,
- The banks may also accept the IEC (Importer Exporter Code) issued to the proprietary concern by the office of the DGFT as an identity document for opening of the bank account etc,
- Complete Income Tax return (not just the acknowledgement) in the name of the sole proprietor where the firm’s income is reflected, duly authenticated and acknowledged by the Income Tax Authorities,
- The utility bills such as electricity, water, and the landline telephone bills in the name of the proprietary concern,
- Issue of GST Registration/Certificate.
How StartupGenie Executes A Sole Proprietorship Registration Procedure
Professional Guidance: Our experts give you professional guidance on many of the processes involved in registering your business as a sole proprietorship, along with registration of service tax, sales tax, import/export code, and professional tax.
Vendor Relationship: Our team will connect you with an established vendor who will book your application and also keep you updated on its status and progress. The vendors we have onboard are well-accomplished and skillful in managing native registrations.
15 Business Days: Our team will offer full assistance with the registration process. This could vary between 5 and 15 days, depending on the task at hand for the authorities involved.
What Are The Documents Required For Registering A Sole Proprietorship?
To start a Sole Proprietorship, the following documents are required
- Address and identity proof
- PAN card, KYC documents and
- Rental agreement or sale deed (in case of Shops & Establishment Act Registration).
What Are The Documents Required For Opening A Current Account?
To open a current account, the following documents are required;
- Proof of the existence of your business
- Shops & Establishments Act Registration
- PAN card
- Address and Identity proof
FAQs on Sole Proprietorship
Who can start a Sole Proprietorship?
Any Indian citizen with a current account in the name of his/her business can start a sole proprietorship. Registration may or may not be required, depending on the type of business that is planned to be established. However, to open a current account, banks typically require a Shops & Establishments Registration.
How long does it take to establish a business with Sole Proprietorship?
A Sole Proprietorship business does not take more than 15 days to set-up and start functioning. This simplicity makes it popular among small traders and merchants. It’s also much cheaper, of course. This is the other reason why it’s the most widely used business structure.
What businesses are commonly run as Sole Proprietorships?
Most local businesses are run as sole proprietorships, from grocery stores to fast-food vendors, and even small traders and manufacturers. That is not to say that larger businesses cannot operate as sole proprietorships, they can! Jewellery shops are sole proprietors, but it is not recommended.
Aside from a current account, is there no need for any other registration?
This depends on the business you’re in. It is compulsory for any business whose turnover in a financial year exceeds Rs 20 lakhs (Rs 10 lakhs in the case of North Eastern states) to get a GST registration. For businesses that are involved in selling goods or services to customers out of a commercial establishment, it is mandatory to register under Shops and Establishments Act.
Is it cheaper to run an LLP than a private limited company?
Yes, it is much cheaper to run an LLP than a private limited company. Mostly because compliances, such as an audit, apply to LLPs only after their turnover is sizeable. Most LLPs spend about half as much as a private limited companies, in their first year on registrations and compliance work.
What if I wish to convert from Sole Proprietorship to Private Limited Company or Partnership?
The procedure involved is a little tedious, but it is possible. It is very common for sole proprietors to convert into partnerships or private limited companies at a later stage of their businesses.
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