Proprietorship Registration
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About Proprietorship Registration
proprietorship is one of the oldest and easiest Business Structure to start in India. A proprietorship is a type of business that is owned, managed, and controlled by one person – who is the proprietor. As the proprietorship and proprietor are one and the same, it is very easy to start and there are very minimal compliance requirements. As the proprietor and the business are one and the same, a proprietorship cannot have other partners or shareholders. Further, there is no limited liability protection for the proprietor from the business activities conducted in the sole proprietorship. Hence, this type of business entity is best suited for every small businesses with no more than 5 employees.
Advantages of Proprietorship
Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process – as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.
Lower compliance: As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.
Simplicity: As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.
Business decision: In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.
Complete control: As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.
Disadvantages of Sole Proprietorship
Funding: This type of business structure relies solely on one persons savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible – as this type of business entity does not allow for profit sharing or shareholding.
Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship – the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure – the proprietor will be held personally liable until all the liabilities are extinguished.
Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.
Growth: A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.
Unincorporated business: Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.
Documents Required For Proprietorship
- Aadhaar Card.
- PAN Card.
- Registered Office proof.
- Bank Account.
Checklist required for Sole Proprietorship
- PAN Card of the proprietor.
- Name and address of the business.
- Bank Account in the name of the business.
- Registration under the Shop and Establishment Act of the respective state.
- Registration under GST, if the business turnover exceeds Rs.20 lakhs.
Customer Reviews For Proprietorship
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Proprietorship FAQ's
Proprietorships in India are a type of unregistered business entity that is owned, managed, and controlled by one person. The micro and the small businesses that are operating in the unorganized sector prefer getting registered as Sole proprietorships.
An Indian Citizen with a current account in the name of his/her business can get a sole proprietorship registration.
It takes around 8 to 10 days but is subject to government processing and document submission.
No, there is no certificate of Incorporation given.
The sole proprietorships exist as long as the proprietor is alive and is desiring to run the business.
No, PAN card cannot be obtain for proprietorship. Proprietorship PAN card will be the same as proprietor PAN card. There is no separate PAN card for proprietorship business.
Any official document that has the name of the proprietor, photo and address like driving license or passport can be used as address proof for proprietorship. In addition to the above, a utility or EB bill in name of proprietor can also be submitted.
Yes, proprietorship current account can be opened in the name of the business. However, for all legal and official purposes – the PAN card of the proprietor will be used. Hence, the ultimate owner and operator of the proprietorship bank account will be the proprietor.
No, GST registration is not mandatory for proprietorship. However, it is recommended that all proprietorship be registered under GST and have UDYAM registration to undertake various business activities.