As the name suggests, Sole Proprietorship is a business that is owned and operated by a sole entity, i.e. a single person. There are a few benefits associated with sole proprietorship that businessman can avail including easy to establish, helpful in penetrating the market in the unorganized sector, no registration (a sole proprietor firm is registered under other acts such as GST). However, it also comes with a few inadequacies which includes unlimited liability and limited existence.
It is easy to establish:The basic requirement is GST Registration, procuring which, you can establish a sole proprietorship within 15 days.
It demands minimal compliance:The only compliance that sole proprietorship has to follow is annual filing of their service, professional or sales taxes.
It is inexpensive:It demands less expenses as compared to One Person Company (OPC). Also, as you have limited compliance to follow you may not require an auditor as well.
Dissolution is easy:As compared to other business start up models, its easy & inexpensive to dissolve Sole Proprietorship company.
Economically viable:Foremostly this is the only alternative, which provides maximum tax saving options & proprietor can opt for individual slab rate to compute its yearly tax. Therefore, it is economically feasible for small business mock-ups.
Fundraising problem:Investors & venture capitalist does not invest in this model as there is no option of share transfer in sole proprietorship company.
It’s not transferable:You can’t sell or transfer a sole proprietorship company as all documents are formed with individual specific Pan card.
No Limited Liability Security:Proprietor is directly responsible for any kind of business loss and there is no option to limit your liability.
There are several registration & licenses which are necessary with registering of your company; it all depends according to the business model. For. e.g. FSSAI is compulsory if you are opening a restaurant business. Here are some basic registrations: –
- MSME Registration
- TAN Registration
- GST Registration
- Import Export code / IEC Code
- FSSAI Registration/ Food License
- Current Account/ Business Account
- Shops & Establishment Registration
- Labour License
Documents depends on whether the business is on lease or owned and if there is any necessity of license or registration. Though some basic documents are always required for registering a Sole Proprietorship company such as:
- Latest Passport Size Photograph
- PAN Card of Proprietor
- Aadhar Card of Proprietor
- Electricity Bill or Any Other Utility Bill for the Address Proof
- Rental Agreement or Sale Deed of Business place
- It has only one promoter/owner who should be citizen of India. NRI And Foreigners can’t open a proprietorship company in India.
- There is no minimum capital prerequisite for registering a Sole Proprietorship company.
- For opening a current account in bank of a proprietorship firm requires GST registration and one of the registrations described above.
- For safeguarding of brand name of proprietorship, one needs to take Trademark Registration separately.
- On basis of the turnover, audit is applicable in proprietorship firm.
- This is the best model for local sellers, small traders, food vendors & local grocery stores.
- One can convert Sole Proprietorship to LLP/Private limited company. But it’s not recommended.
- We deliver end to end consultation before you accept this model of creation for your start up. How taxes impact you, etc. We will absolutely guide you on registration & licenses which are required with this option, for example, MSME & Trademark prominence in registering an LLP Firm in India.
- Also, we handle all the compliance work beginning from managing accounting work, GST return filling, income tax matters and annual audits if applicable.
- We will constantly support you on all monetary needs of the organisation and assist you according to the requirement.
- Generally, it takes 3 to 15 days procedure for registering this kind of business model & further it depends all on the authorities & requirements of client.