Sole Proprietorship

Government Issued Documents

Documents Required

Proprietorship Registration

Sole 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.

Who is a sole proprietor?

A sole proprietor is the sole owner of the proprietorship business. Hence, a business will be carried forward by making new bank account for the business and GST registration will be done by using PAN and Aadhar of the proprietor. The proprietor is completely responsible for all the assets and liabilities of the business.

How to check proprietorship status?

In India, we don’t have to register sole proprietorship. Hence, there is no platform to check the status of a sole proprietorship. However, if a proprietor has applied for GST registration, the GST registration and filing status of the proprietorship can be checked on the GST Portal to confirm the existence of the proprietorship.

Proprietorship legal entity status and recognition

There is no separate recognition of proprietorship as a separate legal entity. Hence, the business owner and the proprietorship are considered one and the same for all legal and official purposes.

Sole Proprietorship Registrations & Licenses

To run a proprietorship business in India, the proprietor will have to obtain PAN and Aadhar. The proprietor must obtain GST registration, UDYAM registration and open a bank current account. In some states, the proprietor will also have to obtain Shops & Establishment Act registration.

In addition to the basic requirements above, additional licence and permits may be required depending on the industry, state, and local regulations.

Proprietorship Business Activities

A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defence, telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, proprietorship business structure only works for business activities that are small scale in nature.

Compliances for Proprietorship

The following are some of the compliances that are applicable for a sole proprietorship:

Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.

Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.

GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.

TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold – tax must be deducted at source and TDS returns must be filed every quarter.

In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.

FAQ's

1. What is a sole proprietorship?

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.

2. Who can get sole proprietorship registration?

An Indian Citizen with a current account in the name of his/her business can get a sole proprietorship registration.

3. How long does it take to register a sole proprietorship in India?

It takes around 8 to 10 days but is subject to government processing and document submission.

4. Are there any compliances for the sole proprietorship?

As the sole proprietorship and the proprietor are the same the individual has to just file the Income-tax returns and GST returns filing for the proprietorship firm.

5. How long does the sole proprietorship exist?

The sole proprietorships exist as long as the proprietor is alive and is desiring to run the business.

Related Business Registrations

In addition to registration or incorporation, a business may require other registrations depending on the business activity undertaken. Talk to an Advisor to find out registrations your business may require post registration.