Sole Proprietorship Registration

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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

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