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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 code (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 online (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.
Compliances Required For Sole Proprietorship Firm
Some of the compliances that apply to a sole proprietorship include the following:
- Income Tax Return Filing:Â The proprietorship’s business owner must submit a personal income tax return using form ITR-3 or ITR-4
- Business Income: Only the ITR-3 and ITR-4 income tax forms allow for the declaration of business income. As a result, in order to comply with income tax requirements, all proprietorships must submit forms ITR-3 or ITR-4
- GST Return Filing: If a proprietorship is registered for GST, a filing GST return each month and every three months in accordance with the business’s registration plan
- TDS Returns: Tax must be withheld at source and TDS returns must be filed quarterly if the proprietorship has employees or spends more than a specific amount on goods and services.
In addition to the mentioned points, the proprietorship may also need to comply with additional regulations according to its industry and region.
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Sole Proprietorship Registration Procedure?
1. 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.
2. 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.
3. 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.
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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
Proprietorship Vs Limited Liability Partnership (LLP) Vs Company
| Features | Proprietorship | Partnership | LLP | Company |
|---|---|---|---|---|
| Definition | Unregistered type of business entity managed by one single person | A formal agreement between two or more parties to manage and operate a business | A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company. | Registered type of entity with limited liability to the owners and shareholders |
| Ownership | Sole Ownership | Min 2 Partners Max 50 Partners | Designated Partners |
For One Person Company
|
| Registration Time | 7-9 working days | 7-9 working days | 7-9 working days | 7-9 working days |
| Promoter Liability | Unlimited Liability | Unlimited Liability | Limited Liability | Limited Liability |
| Documentation |
| Partnership Deed |
|
|
| Governance | – | Under Partnership Act | LLP Act, 2008 | Under Companies Act,2013 |
| Transferability | Non Transferable | Transferable if registered under ROF | Transferable | Transferable |
| Compliance Requirements | Income tax filing if turnover is more than ₹.2.5 lakhs | ITR 5 |
|
|
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Frequently Asked Questions
- Private Limited Company
By virtue of section 2(68) of the Companies Act, 2013, Private Limited Company is a type of company which offers limited liability with certain restrictions defined in regulations:
- restricts the right to transfer shares
- Limits the numbers of its members to 200
- Prohibits any invitation to the public to subscribe for any shares in, are debentures of the company(No Public Trading of Shares)
- Prohibits any invitation or acceptance of deposits from persons other than its member
- The word ‘Private Limited’ must be added at the end of its name
- One Person Company
One Person Company popularly known as OPC introduced in India under the Companies Act, 2013. The concept of OPC is a fusion of sole proprietorship and private company which intends to permit single economic entrepreneurship to take the advantages of a corporate form of organisation.
- Limited Liability Partnership
Limited Liability Partnership is a corporate entity registered under Limited Liability Partnership Act, 2008. It is a form of partnership firm that enjoys limited liability. It is a hybrid form of a partnership that includes the features of a company. Compliances for a company are applicable to LLP.
No, the whole incorporation process is online. You can send the scanned copy of all the required incorporation documents via e-mail. All the forms and documents are filed electronically and even signed digitally.
The company name should be selected with utmost care. The rules for selecting a company are:
- The name should be ended with the words “Private Limited” in case of private company, “OPC” in case of one person company and “LLP” in case of limited liability partnership which is mandated by law.
- The name must be unique.
- Follow the naming guidelines for better chances of approval.
- The name should be suggestive of the main objectives to be taken by the business entity.
- Private Limited Company
- Appointment of auditor
- Statutory audit of accounts
- Filing of annual return
- Filing of financial statements
- Holding Annual General Meeting (AGM)
- Prepare directors’ report
- Filing of income tax return
- One Person Company
- Appointment of statutory auditor
- Holding Board Meetings (BM)
- Filing of financial statements
- Filing of annual return
- Limited Liability Partnership
- Filing of financial statements
- Filing of annual return
- Filing of income tax return
- Appointment of auditor
- Filing of LLP annual return
You don’t need a proper office to incorporate a business entity. You can register your residential address as a registered place of your business with MCA for which some address proof along with the NOC (No Objection Certificate) has to be filed with the prescribed form.
NRIs only allowed to incorporate limited business entities in India including private limited company and limited liability partnership. Also, there is no requirement to obtain the prior approval from the government or RBI. But, in order to register a private company or an LLP at least one director/partner must be a resident of India. However, the private limited company is ideal for NRIs.
In order to execute the idea into a long-term business, choosing the right form of business is important. For start-ups, Private Limited Company is the best option for the following reasons:
- Limited legal compliances
- No minimum capital contribution
- Need only 2 directors and shareholders (both can be the same person)
- Funding can be raised
- Limited liability of the members
As per the relevant Act, there is no minimum requirement for Paid-up Share capital or contribution to incorporate a private company, one person company or limited liability partnership. However, each shareholder/partner should subscribe to a minimum one share of Rs.10 face value.