Small manufacturers and traders, who typically have just a GST registration, are known as sole proprietors.
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Why should you register your Company?
Registering a company offers many benefits. A registered company makes it genuine and increases the authenticity of your business.
- Shields from personal liability and protects from other risks and losses.
- Attracts more customers
- Procures bank credits and good investment from reliable investors with ease.
- Offers liability protection to protect your company’s assets
- Greater capital contribution and greater stability
- Increases the potential to grow big and expand
- You will also get Zero Balance Current Account
What is a Sole Proprietorship?
When a business is owned and governed by one person it is called a sole proprietorship company. This type of business can be started in 15 days and hence makes it one of the most popular kinds of business to begin in the unsystematic sector, specifically among merchants and small traders. For a sole proprietorship business, registrations are not required as they are identified by alternate registrations such as GST registrations. However, its liability is unlimited and it also doesn’t have a continuous presence.
WHY START-UPS PREFER SOLE PROPRIETARSHIP AS A BUSINESS FORM?
The Sole Proprietorship is one of the most preferred business legal forms by growing Indian start-ups. A private limited company can fulfill the requirement of raising funds from private investors easily; attract less tax and is a separate legal entity with perpetual succession which is restricted to other business types. Find out more.
Benefits of Proprietorship
Sole Proprietorships have minimum compliance as this firm is identified by its government and tax registrations. Therefore, the degree of its agreement is confined to the yearly filing of the service, sales or professional taxes.
Simple to Begin
Any sole proprietorship is simple to begin. One needs to simply have a GST Registration in place. Hence, the procedure is not complicated. Therefore, the sole proprietorship business can be set up in 15 days with the help of a PAN card for identity and proof of address.
When compared to an OPC or One Person Company, a Sole Proprietorship is economical due to its minimum compliance requisites. Even in the long-term perspective, it is still inexpensive. It works out much cheaper because one would not need to hire an auditor. One of the main reasons why small merchants and traders choose it.
Frequently Asked Questions
Q. Who can start a sole proprietorship?
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.
Q. What documents are needed for opening a current account in the name of my sole proprietorship?
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.
Q. How long does it take to establish a business with Sole Proprietorship?
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.
Q. What businesses are commonly run as sole proprietorships?
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.
Q. What documents are required for starting a sole proprietorship?
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).
Q. Aside from a current account, is there no need for any other registration?
This depends on the business you’re in. It is compulsory for any business whose turnover in a financial year exceeds Rs 20 lakhs (Rs 10 lakhs in the case of North Eastern states) to get a GST registration. For businesses that are involved in selling goods or services to customers out of a commercial establishment, it is mandatory to register under Shops and Establishments Act.
Q. Can I apply for any of these registrations online?
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.
Q. What if I wish to convert from sole proprietorship to private limited company or partnership?
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.