Sole-Proprietorship
The perception of doing business varies from person to person, as the choice of a business entity depends on its object, nature and scope. Before deciding on a business structure, several factors are critical viz.
- Business activity and its nature and scope
- Working capital requirement
- Proprietor’s dependence
- Concern on taxes to be paid for doing the business
The factor that organizes the process to conduct business in an optimized manner is known as a business organization. It is essentially a structured approach of establishing and maintaining a relationship among men, material, and machinery to carry on the business efficiently for earning profits.
Most of the individuals who manage their business to earn their daily bread are sole-proprietors. The small business entities in India fall under the category of unorganized sector.
To start and to operate a sole-proprietorship in India, there are no standard legal compliances. However, registration with the local authorities is necessary to secure a license for a business name.
- Any Indian born citizens with a valid PAN can start and operate a sole-proprietorship
- No other compliance is required
- Indian citizens by birth or by citizenship
- Persons holding PAN & Aadhaar
Even though a business entity can be established and maintained in different forms, each of the businesses has its own merits and demerits:
Merits of sole-proprietorship:
- Very little compliance to adhere
- Zero interference from Government
- Minimal wastage of time for approvals
- Working capital as per business need
- Single PAN for self and business entity
- Hassle-free opening of current account
- Proprietorship registration
- Single ITR-3 to present the profit or loss with the personal income
- No need to distribute the profit
Demerits of sole-proprietorship:
- No separate legal entity from its proprietorship
- Losses in business may impact the personal assets of the proprietor
- Due to a single PAN, transferring the profits to someone to meet future needs is difficult.
- In case of the death of a proprietor, the proprietorship also ceases.
- Difficult to secure investments
- Difficult to earn and identify
Registration of sole-proprietorship
Any individual desiring to start a sole-proprietorship has to obtain a business license or a tax license as presented below:
- Shops and Establishment license
- GST Registration
- Trademark / Brand Name / Logo Registration (so that no one-else should use your similar / identical name, Logo)
- MSME Udyam Registration (for availing collateral free Bank loans and government subsidies)
- FSSAI Registration (for doing business on food and related articles)
- Import and Export Code (for export-import business)
- Copyright (for persons engaged in literary & artistic business)
Documents for sole-proprietorship registration:
- Proprietor’s PAN Card & Aadhaar card
- Proprietor’s name or the business name
- Mobile number and email address
- Rental agreement with NOC and a utility bill viz. electricity bill / water bill / property tax receipt / BSNL Telephone bill
A first-time entrepreneur who wishes to taste the business out of a passion may put in the best efforts, after weighing the options available, to remain independent, rather than working for someone. Unlike a partnership firm or a corporate, sole-proprietorship is an easy way of registering for a business due to minimal government intervention, besides hassle-free conduct of business.
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