How To Register A Sole Proprietorship Company in India

A sole proprietorship company is a special form of the organization run by a single person. This form of organization is very popular in India among the startup entrepreneurs. Because this is less expensive, quickly openable and doesn’t demand ROC compliances. However, it has limitations too.

Here in this article, we intend to explore how to register a sole proprietorship company in India. Additionally, we put important considerations on the advantages & disadvantages, documentation,  and other licensing factors.

What Is A Sole Proprietorship Company

A sole proprietorship company is a form of the organization managed and owned by a single person. This form of organization is the most popular business entity in India. This type of company is perfect for the first generation entrepreneurs. Additionally, it is perfect for starting any small offline or online business as such. After taking the decision, you can start operation within 15 days of time.

The PAN card of the owner helps to open a current account in any nationalized or private bank. You may require a Trade License from the local municipal authority. And after getting the current account number, you can apply for other licenses. Such as manufacturing license, VAT, Service Tax, IEC, FSSAI etc.

Advantages & Disadvantages Of Sole Proprietorship Company

The proprietorship organization has many advantages. However, it has so many disadvantages too. You must take a decision on some crucial factors. Here we put some of the basic considerations.

  • Easy To Start: This type of organization is easy to open. You only need to have a current business bank account for operation. And after that, you can apply for the other necessary licenses.
  • Easy Compliances: As a proprietorship owner, you don’t have to file the tax compliances separately. You will only need to file your own income tax return including the business transactions. It really saves a lot of money and energy as well.
  • Utmost Control: In this type of the organization, you have the entire control of your company. You can take any sort of decision without asking anyone or making any resolution.
  • Liability: In this type of business entity, you have the entire liability of your organization. If anything goes wrong, you are the person who needs to take care of everything. Even, you could be sued for any unlawful acts committed by the employees. Therefore, this is the biggest disadvantages of a sole proprietorship company.
  • Difficult to raise capital: It is difficult to raise fund for a proprietorship company compared to other forms of organizations. Additionally, a proprietorship firm is not eligible for issuing stocks or other money-generating investments like corporations do.

Related: 8 Forms Of Business Organization India | How To Choose | Basic Guide

Who Can Register A Sole Proprietorship Company?

Any Indian citizen with an age of 18 years+ can start this types of organization. However, he or she must have a PAN Card and current bank account. A sole proprietorship company doesn’t demand any kind of ROC registration and compliances.

Business wise, any types of manufacturing, service based or retail organization can open this type of organization. This form of business is also perfect for the self-employed businesses.

Step-by-step Process Of Opening Sole Proprietorship Company

  • Regardless you are starting a manufacturing or service based or retail business, select a name of your business. Additionally, protect the name with Trademark registration.
  • Obtain a Trade License. At least apply for the license. Municipal Authority will issue an acknowledgment letter of having the application. It helps in opening a bank account.
  • Then open a current bank account. However, according to your business size and nature of business, select a bank carefully. Because, before having a current bank account, you won’t be able to apply for any other licenses.

Related: How to Open a Business Account in India – Procedure & Documents

  • If you are starting the business from a rental propriety, then mention it in the agreement. Bank may ask you to submit as the proof of an address of the business.
  • After getting the bank account, you can apply for other licenses like VAT or Shops & Establishments or Service Tax.

Related: One Person Company In India | Step By Step Guide

If you want to have a legal entity with a sole proprietorship nature, you can register as an OPC. However, it is always better to start a business as proprietorship company when you want to taste the water first.