SOLE PROPRIETORSHIP

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SOLE PROPRIETORSHIP

Small manufacturers and traders, who typically have just a service tax or VAT registration, are known as sole proprietors.

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WHAT IS SOLE PROPRIETORSHIP?

A sole proprietorship is a business that is owned and managed by a single person. You could have one up and running within 15 days, which makes it very popular among the unorganised sector, particularly small traders and merchants. There is no such thing as registration; proprietorships are recognised by other registrations, such as a service tax registration or sales tax registration. As you would imagine with a business that’s so easy to set up, though, its shortcomings are severe: the liability of the proprietor is unlimited and it does not have a continuous existence.

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Any Indian citizen with a current account in the name of their business can start a sole proprietorship. Registration may or may not be required, depending on what business you are planning to establish. However, to open a current account, banks typically require a Shops & Establishments Registration.

To open a current account, you need proof of the existence of your business. Most banks will ask for a Shops & Establishments Act Registration. In addition, you will need a PAN card and address and identity proofs.

A sole proprietorship business does not take more than 15 days to open-up and get running. This simplicity makes it popular among the small traders and merchants. It's also much cheaper, of course. This is the other reason why it's the most widely used business structure.

Most local businesses are run as sole proprietorships, from your grocery store to a fast food vendor, and even small traders and manufacturers. This is not to say that larger businesses do not operate as sole proprietors. Even some jewellery shops are sole proprietors, but this is not recommended.

To start a sole proprietorship, you would need address and identity proofs, PAN card, all KYC documents and rental agreement or sale deed (in case of Shops & Establishment Act Registration).

This depends on the business you're in. If you're running a departmental store, then you would also need a VAT Registration once your turnover is over Rs. 5 lakh per annum. If you're running a air-conditioned restaurant, you would need a VAT Registration and Service Tax Registration.

The registrations controlled by the central government -- service tax, for example -- can be availed of online, whereas the state-government-controlled ones may or may not be. In some technologically advanced states, such as Karnata, they are, whereas in others they may not be.

You can always choose to do so. The procedure is a little tedious, but it is possible. It is very common for sole proprietors to convert into partnerships and private limited companies at a later stage.

Advantage

Minimal Compliance

Sole Proprietorships are only recognised via their government and tax registrations, so the extent of their compliance is limited to the annual filing of their service, professional or sales taxes.

Easy to Start

A sole proprietorship could take 15 days to start if all you need is a Service Tax Registration, but this would stretch to even 45 days if you need Sales Tax Registration. Either way, the process is uncomplicated. PAN card and identity and address proofs are enough to get them done.

Relatively Inexpensive

A Sole Proprietorship is inexpensive as compared to a One Person Company (OPC) and, thanks to the minimal compliance requirements, is inexpensive even over the long-term. You would not need to hire an auditor, for example. This is why, despite its severe shortcoming (unlimited liability), small merchants and traders opt for it.

1WORKING DAYS

We will help you decide what registration you need, whether service tax, sales tax, import/export code, professional tax or Shops and Establishments Act registration. We will also inform you of the documents you need to get started.

5 WORKING DAYS

We will connect you to a verified vendor who will file your application and keep you up-to-date on its status. Our vendors are well-experienced in handling local registrations.

15 WORKING DAYS

We will offer our complete support until you receive the registration you've selected. This could take up to 15 days in some cases, but as few as 5 days in others. This depends on the workload of authorities and other externalities.