OVERVIEW
If a business is run by a single person in an individual capacity, then it is known as the Sole Proprietorship Firm, and that single person is popularly known as Proprietor. This format of business is most popular in our country as it involves minimum cost and least compliance. There is no specific procedure to form a sole proprietorship firm but a person may need to register his business to open his current account in the Bank. The following registrations can be used to show the legal presence of a business and to open a bank account:
- MSME/Udyog Aadhar.
- Goods and Service Tax (GST) Registration.
- Professional Tax registration.
- Shop and Establishment registration.
The following documents are required to start a Proprietorship Firm:
- PAN Card of Proprietor.
- Aadhar Card of Proprietor.
- Current Account of business.
- Address Proof of business place.
Advantages of Sole Proprietorship Firm:
- Painless Start: Proprietorship firm may be started with no pain because it does not require any registration. As no such registration formality is required, it can be started with least cost and effort. There is just one hurdle that banks require to have legal registration to open a current account so that a person needs at least one registration like GST, MSME etc to legalize his business.
- Sole Proprietorship: Sole owner is free to make business decisions freely and quickly.
- Taxation benefits: Proprietorship firms enjoy the benefit of slabs rate while paying income tax. So that it results in more savings in income tax than any other form of business.
- Easy to wind up: Since there are at least formalities required to start a business, it can also be closed with minimum formalities.
- Privacy: As information of proprietorship firms are not uploaded on any public portal, there are less chances of leakage of sensitive or confidential information.
- Entitled for full profit: As there is no partner in proprietorship firm, proprietor is entitled for full profit.
FREQUENTLY ASKED QUESTIONS:
- What is the meaning of Sole Proprietorship Firm?
If a business is run by a single person in an individual capacity then it is known as Sole Proprietorship Firm and that single person is popularly known as Proprietor.
- What is the procedure to legalise Sole Proprietorship Firm?
You can legalise your firm by getting any one of the following registration-
- MSME/Udyog Aadhar.
- Goods and Service Tax (GST) Registration.
- Professional Tax registration.
- Shop and Establishment registration.
- Who is known as Proprietor?
If a business is run by a single person in an individual capacity then it is known as Sole Proprietorship Firm and that single person is popularly known as Proprietor.
- Who can become Proprietor?
Any person who is of sound mind and is a resident of India can be proprietor of a proprietorship firm.
- What are mandatory legal compliances to be followed by a Proprietorship firm?
There is a requirement to file a yearly Income Tax Return. If the firm is GST registered then various monthly/quarterly/annual returns are to be filed by the proprietor.
- What is income tax taxation for proprietorship firms?
Proprietor is liable to pay income tax per slab rate prescribed by the Income Tax Act, 1961. Proprietorship firms enjoy the benefit of slab rates.
- What are liabilities of a Proprietor?
In case of any damage or loss, there are unlimited liabilities on proprietor. It means if assets of the firm are not large enough to cover the amount of liabilities, then assets of proprietor can be used to cover the damages. The phenomenon of “Un limited Liability” is biggest drawback of the Sole Proprietorship firm.
- Can the Sole Proprietorship firm be changed to a Private Limited or Limited Liability partnership?
Yes.
- Can more than one business be conducted in one Proprietorship Firm?
Yes. There can be more than one business in a single Proprietorship Firm.
- Is there any minimum capital requirement to start a Sole Proprietorship Business?
No. There is no minimum capital requirement to start a Sole Proprietorship Business
