Proprietorship Firm

The most popular business structure among small business owners is the sole proprietorship. It allows entrepreneurs to launch a business quickly and with little money. Many small business owners and enthusiastic entrepreneurs are eager to register as sole proprietary organizations to establish their innovative and original business ideas, as sole proprietorships and MSMEs are becoming increasingly popular. 

What is a Sole Proprietorship?

A proprietorship is an unregistered business controlled, managed, and owned by just one individual. Most small and micro businesses in the unorganized sector often choose the proprietorship business form. 

It calls for a relatively straightforward procedure with low formation costs and legal compliance requirements. The majority of offline local firms favour sole proprietorship. Explore the key elements and prerequisites for registering a sole proprietorship business.

The benefits of being a sole proprietor

• Limited compliance

One individual can easily create a sole proprietorship firm. To get it incorporated, a minimum level of conformity must be met. This type of business is cost-effective since it requires less capital to launch than an LLC or corporation.

• Authority over the enterprise

The business will be entirely under the sole proprietor's control. He will handle every facet of the company. Confidentiality can be preserved because only one person is managing the company.

• Making decisions quickly

Every decision regarding the business is made by the sole proprietor. There is only one person who makes the decisions. As a result, judgments can be made fast and without seeking advice from anyone.

Important Records Needed for the Registration of a Proprietorship Firm

The paperwork needed to register your sole proprietorship may differ depending on your chosen registration type.

There are three ways to register your exclusive, unique business, including: 

• GST registration, 
• Udyog Aadhaar registration, or Udyam registration, and 
• Shop and Establishment Act registration 

Nonetheless, the important documents listed below are standard and required for all registration methods. The following documents are needed for the registration of a sole proprietary concern:

• Address proof 
• Aadhaar Card 
• PAN Card 
• KYC documents 
• The self-owned property's utility bill or sale deed, or the leasing agreement for registered office verification.

How to Register a Sole Proprietorship?

This is an extensive guide that will walk you through the process of registering a proprietorship.

• Compile Records

Gather all the information you need regarding the owner, including identification, proof of address, and pictures. Additionally, compile documentation regarding the main site of your company's operations. Verify the authenticity and currentness of each document.

• Choose an Original Name

Select a distinctive name that complies with the law for your proprietorship. Make sure the name does not breach any intellectual property rights or registered trademarks. You can use the IP India portal's trademark accessible database search to confirm if the suggested terms are available. To safeguard it against possible infringement or misuse, it is essential to register the selected name as a trademark.

• Udyog Aadhar, Udyam Registration, and MSME

A business bank account can be opened with two necessary documents in your proprietorship's name. The MSME or Udyam Registration Certificate is the second document, and the Udyog Aadhar card is the first. These documents give you access to online MSME services and advantages provided by different government offices, as well as incentives under the MSME Act.

• Registration for GST

In the event that your sole proprietorship offers goods or services throughout India, GST registration is required. On the other hand, if your company only works in one state, you only need to register for GST if your annual revenue for products or services above Rs. 40 lakhs or Rs. 20 lakhs.

• Acquire Additional Tax Registrations

Depending on your business's needs and type, consider getting additional tax registrations as needed. These could involve filing income, professional, customs or any other taxes related to your business.

• Shop and Establishment Registration

You could also require a Shop and Establishment Registration and the registrations mentioned above. This registration requires operating a real store, office, or other commercial establishment. It is a state-level registration that aids in regulating the terms of employment, working conditions, and other regulations for staff members in these establishments. States may differ in their specific requirements and procedures for getting this registration. To obtain information, contact the labor department in your area or go to their website.

Annual compliance for a sole proprietorship

The annual compliances for a sole proprietorship are as follows:

•  If your annual turnover is more than Rs 20 lakh, register for GST.
•  Additionally, a Shop and Establishment registration can be undertaken.
• You must file an income tax return each year as a sole proprietor.
• If a proprietor is engaged in a proprietary business or occupation, they must file ITR Form -3.
• ITR Form -4 is for people who, by Sections 44AD, 44ADA, and 44AE of the Income Tax Act, 1961, have chosen the presumptive taxation scheme and do not keep the Book of Accounts in a sole proprietorship and get income from a business or profession.
•  If a sole proprietor is subject to a tax audit, they must additionally deduct TDS and submit a TDS return.

Which Registration Process Is Best for Proprietorship Firms?

Which of the three registration techniques listed above is suitable for you will depend entirely on your company's needs. Before selecting a registration method, carefully evaluate your company's needs, objectives, compliance requirements, and other factors. This can help you determine which registration option will best support your company's growth and advancement within the market. However, if your company's annual revenue exceeds ₹20 lakhs, you may opt to register for GST. 

The nicest thing about Indian sole proprietorship firms is their simple registration process, which operates independently of legal registration. In India, it is also the most traditional type of commerce.