Sole Proprietorship Registration

DOCUMENTS REQUIRED

A proprietorship is a type of business that is owned, managed, and controlled by one person. A Proprietor is the sole owner and decision-maker of the business. The proprietorship and proprietor are one and the same which makes the process of registration easy. Sole proprietorships are unincorporated businesses.

Advantages of choosing Sole Proprietorship

Smooth Registration Process and Lower Complianc

You would only be required to register with government departments like Income Tax & GST, which makes the compliance burden low and pocket friendly. On the other hand, entities like LLPs or Companies are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.

Sole Ownership

In Sole proprietorship, there are no partners, shareholders, or directors required and the proprietor can easily operate this business with minimal documents and sole ownership. You shall have complete control over the assets, revenue, expenses, and all business operations.

Quick Decision-making

In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person.

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Disadvantages of Sole Proprietorship

Capital/Funding

Since Sole proprietorship solely relies on a single person’s earning, savings, borrowings and credit worthiness, it is very tough to raise the capital or fund in the proprietorship as there is no one else involved to raise the fund which also effects the capacity to raise funds from banks.

Unlimited/Personal liability

An individual is the same as the proprietorship and there for the liability of the proprietorship is the liability of the individual and the individual is unable to repay the liability- the personal assets of the individual may get attached or encumbered or sold in order to recover that liability.

Business continuity

In the event the individual dies, the proprietorship will be automatically dissolved as the individual and the proprietorship is the same entity. Hence, there will be no business continuity.

Less Credibility

Sole proprietorships is considered an unincorporated businesses. Therefore, it carry a less credibility when it comes to other types of business structure. In proprietorship, there is no centralized database available, such as MCA portal, to see it is active or inactive.

Procedure for Registration of Sole Proprietorship

First step

Applying for PAN card, Aadhar card

Second step

the next step shall be to keep a name for the sole proprietorship business.

Third step

the third step shall be to open a bank account in the name of the business.

Fourth step

The proprietor needs to obtain the Registration Certificate under the Shops and Establishment Act of the state in which the business is located.

Fifth step

Register for GST and Small and Medium Enterprise (SME) under MSME Act, though it is not mandatory, it is beneficial to be registered under the same.

Difference between Proprietorship, Partnership, Limited Liability Partnership, Private Limited Company and One Person Company

Features	Proprietorship	Partnership	LLP	Company	OPC
Number of Person	One person	Two or more	Two or more	Two or more	One person and one nominee
Designation	Proprietor	Partner	Designated Partner	Director	Director
Name	As it is	As it is	Ends with LLP	Ends with Private Limited	Ends with OPC Private Limited
Registration	Shops and Establishment	Registrar of Firms	Registrar of Companies	Registrar of Companies	Registrar of Companies
Capital	No Minimum	No Minimum	No Minimum	No Minimum	No Minimum
Legal Status	Not a Separate Entity	Not a Separate Entity	Separate Entity	Separate Entity	Separate Entity
Liability	Unlimited	Unlimited	Limited	Limited	Limited
Audit	If turnover above 1 crore	If turnover above 1 crore	If contribution above 25 lakhs or turnover above 40 lakhs	Compulsory	Compulsory
Compliance	Least	More than proprietorship	More than partnership, less than company	Most	Less than Company
Filing of resolution	No	No	No	Yes	Yes
Taxability	Less	Less	30%+surcharge +cess Distribution of profits not taxed	30%+surcharge +cess Distribution of profits taxed	Comparatively More
Meetings	Not mandatory	Not mandatory	Not mandatory	Mandatory	Mandatory
Credibility	Less	Less	More than Partnership less than company	High	High
Dissolution	Easy	Easy	Less complex than company	Complex	Complex
Governance	Not by any law as not a separate entity	Partnership Act, 1932	LLP Act, 2008	Companies Act, 2013	Companies Act, 2013
Agency	No	Partners agent of each other	Partners not agent of each other	Members not agent of each other	Members not agent of each other
Property	Belongs to the Proprietor	Belongs to its partners jointly	Separate from its partners	Separate from its members	Separate from its members
Transfer of Share	Not possible	Not possible	Possible	Possible	Possible
Number of Members	One	2 to 20 2 to 10 (Banks)	Min- 2 No Maximum	Min- 2 Max- 200	One
Duration	Till death or insolvency or retirement of proprietor	Till death or insolvency or retirement of partner	Perpetual Succession	Perpetual Succession	Perpetual Succession