Do you want to register a sole proprietorship firm in India? Find in this article a detailed step-by-step guide on requirements, fees, and the process of starting a sole proprietorship company.
There are many ways of registering a business in India. Presently, some of the most popular forms of registering a small business firm are Proprietorship, OPC, LLP, and Private Limited Company. Based on the nature and magnitude of your business you need to decide which company formation is best suited for your venture.
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Steps to Register a Sole Proprietorship Firm in India
Before we explain the steps in detail of registering a proprietorship business in India, let us first try to understand what is actually meant by a sole proprietorship company in India.
What is a Sole Proprietorship Company?
A sole proprietorship company is a form of organization managed and owned and run by a single person. Simply put, in a Sole proprietorship firm, only one person controls the entire business. As a matter of fact, the owner and the business are treated as one single entity.
This form of organization is the most popular business entity in India. This type of company is perfect for people starting a business venture for the first time.
Let us go through the advantage and disadvantages of a Sole Proprietorship company.
Advantages 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.
- Ease of Compliances
As a proprietorship owner, you don’t have to file the tax compliances separately. You will enjoy the tax benefits of paying taxes at individual tax rates instead of corporate rates.
- Utmost Control
In this type of organization, you have the entire control of your company. You can take any sort of decision without asking anyone or making any resolution.
Disadvantages of Sole Proprietorship Company
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 disadvantage of a sole proprietorship company.
- Difficulty in Raising Capital
It is difficult to raise funds 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.
Who Can Register A Sole Proprietorship Company?
Any Indian citizen with age of 18 years+ can start these types of organizations. However, he or she must have a PAN Card and a current bank account. A sole proprietorship company doesn’t demand any kind of ROC registration and compliance.
Business-wise, any type of manufacturing, a service-based or retail organization can open this type of organization. This form of business is also perfect for self-employed businesses.
Registering a Sole Proprietorship Firm
Before you apply for sole proprietorship firm registration, you must be ready with the following documents:
Regardless you are starting a manufacturing, online, service-based, or retail business, select the name of your business. Additionally, if you want to protect the name of your company or brand, go for Trademark registration.
- Apply for a Trade License. To obtain a trade license in India, you must mention the address of the place you will be operating the business.
- If you are starting the business from rental property, then mention it in the agreement. Bank may ask you to submit proof of the address of the business.
- Municipal Authority will issue an acknowledgment letter of having the application. It helps in opening a bank account.
- After you receive a trade license certificate then. open a current bank account. However, according to your business size and nature of the business, select a bank carefully. Because, before having a current bank account, you won’t be able to apply for any other licenses.
- Apply for GSTIN Number if your annual turnover is crossing Rs. 20 lacs. One can register for a GST number online and get it in a few days.
Documents Required for Sole Proprietorship Registration
During the process of firm registration, the following documents will be required:
- Copy of your PAN card.
- Address Proof ( Aaadhar Card, Voter Card, Passport, or Utility Bills).
- Passport-sized photographs.
- Name of Business
- Proof of address for your business
- Shops and Establishments registration certificate (for opening a current bank account)
The process of registration normally takes not more than 2 days. However, the time period may vary depending on the nature of registration.
Fees Required to Register a Sole Proprietorship Firm In India
The government fees for registering a sole proprietorship firm in India are Rs 500 onwards depending on the nature of your business. If you hire a professional, you have to pay for him/ her extra.
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 a proprietorship company when you want to taste the water first.