Proprietorship

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss etc.

The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's. It is a "sole" proprietorship in contrast with partnerships(which have at least two owners). A sole proprietor may use a trade nameor business name other than his, her or its legal name. They will have to legally trademark or register their business name with any Government department e.g. VAT/Service Tax/Excise/Custom/Shop and Establishment Act/Luxury and Entertainment Tax etc.



Inclusion

VAT/SERVICE TAX/EXCISE/IEC or any other registration applicable and selected by the user.

Courier charges of sending the original certificate at your address.

Any Government Fee or charges payable.

Application of PAN and or TAN, if not available.

EXCLUSIONS

Inspection fee payable at the time of visit to the officer if any.

Fresh application fee if registration applicable is rejected

REQUIRED DOCUMENTS

Identity and Address Proof of the Applicant

Copy of PAN card

Passport size Photographs, if applicable

Any other documents according to selected registration.

TIMELINE

2 day process for gathering the necessary details and documents

1 day process for getting documents ready for submission.

2 day process for submitting application to government after signing and verification of all documents

1 day process for providing certificate after approval from relevant department and updating its status.




FREQUENTY ASKED QUESTIONS


1. What is Proprietorship?

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss etc.

2. Whether a person can use separate name for business other than his own name?

Yes, a sole proprietor may use a trade name or business name other than his, her or its legal name. But to legally operate business in hisown name registration with government department is required in order to open bank account and comply with KYC norms of banks. To know how to open bank account. click here

3. Whether a proprietor can apply for trademark/copyright registration?

Yes, a proprietor can apply for registration of his brand name or business name like any other form of business i.e. company, partnership, limited liability partnership (LLP). To know about trademark registration click here

4. Whether registration with government departments are mandatory ?

No, only applicable government registrations are mandatory like if sales exceed specified limit of turnover then registration with Value Added Tax (VAT), Service Tax Registration, Excise or shop and establishment as applicable are mandatory. However as per RBI norms government proof of business is mandatory to open a current bank account, in that case registration with either Value Added Tax, Service Tax, Excise, Import Export Code, Shop and Establishment or other local commercial departments are required. To know about registration with government departments click here

5. What are the advantages of start business in Proprietorship?

Advantage
Ease of Formation

Starting a sole proprietorship is much less complicated than starting a formal corporation, the proprietorship can be named after the owner, or a fictitious name can be used to enhance the business’ marketing.

Advantage
Tax Benefits

The owner of a sole proprietorship is not required to file a separate business tax report. Instead, they will list business information and figures within their individual tax return. This can save additional costs on accounting and tax filing. The business will be taxed at the rates applied to personal income, not corporate tax rates.

Advantage
Employment

Sole proprietorships can hire employees. This can lead to many of the benefits associated with job creation, such as tax breaks. Also, spouses of the business owner can be employed without having to be formally declared as an employee. Married couples can also start a sole proprietorship, though liability can only assumed by one individual.

Advantage
Decision Making

Control over all business decisions remains in the hands of the owner. The owner can also fully transfer the sole proprietorship at any time as they deem necessary.

6. What are the disadvantages of start business in Proprietorship?

Advantage
Liability

The business owner will be held directly responsible for any losses, debts, or violations coming from the business. For example if the business must pay any debts, these will be satisfied from the owner’s own personal funds. The owner could be sued for nay unlawful acts committed by the employees. This is drastically different from corporations, wherein the members enjoy limited liability (i.e., they cannot be held liable for losses or violations)

Advantage
Taxes

While there are many tax benefits to sole proprietorships, a main drawback is that the owner must pay self-employment taxes, while in companies/Partnership firm directors/partners can take salaries.

Advantage
Lack of “continuity”

The business does not continue if the owner becomes deceased or incapacitated, since they are treated as one and the same. Upon the owner’s death, the business is liquidated and becomes part of the owner’s personal estate, to be distributed to beneficiaries. This can result in heavy tax consequences on beneficiaries due to inheritance taxes and estate taxes.

Advantage
Difficulty in raising capital

Since the initial funds are usually provided by the owner, it can be difficult to generate capital. Sole proprietorships do not issue shares or other money-generating investments likecorporations do

Advantage
More Risk

So, while sole proprietorships do not necessarily create more liabilities, they do expose the business owner to a risk of being sued. Lawsuits can be filed against the business owner for legal violations, as well as to collect any outstanding debts.

7. Can a proprietor invite investor’s money?

Yes, but only as secured and unsecured loans, proprietor cannot invite equity capital of the investors. Further bank loans can also be brought, however the bank a credit rating give more preferences to Companies and Limited liability partnership.

8. How can i compare proprietorship with other form of business?
Basis Sole Proprietorship Partnership Limited Liability Partnership Pvt. Ltd Co OPC Public Limited Company
Annual income tax return filing Filing of return is compulsory only if the Gross Total income exceeds the Exemption limit. Compulsory irrespective of profit or loss earned by entity during the year. Compulsory irrespective of profit or loss earned by entity during the year. Compulsory irrespective of profit or loss earned by entity during the year. Compulsory irrespective of profit or loss earned by entity during the year. Compulsory
Statutory Audit Not Applicable Not Applicable Not Applicable Compulsory Compulsory Compulsory
Liability Unlimited liability Unlimited liability As the name itself suggests, there is limited liability in case of limited liability partnership. Limited by Guarantee or Shares Limited by Guarantee or Shares Limited by shares
Ownership and Control One person has total control and ownership of the enterprise. Ownership and Control is through mutual agreement. Ownership and control is through mutual agreement. Ownership and control is amongst the shareholders of the co. Ownership and control is in the hands of only one member. Ownership is amongst the shareholders and control among the directors chosen by shareholders
  One Minimum 2 Minimum 2 Minimum 2 One Minimum 7
Complications Sole proprietorship is the least complicated form of business. Partnership is also less complicated as compared to company but more complicated as compared to sole proprietorship. Partnership is also less complicated as compared to company but more complicated as compared to sole proprietorship. Most complicated as compared to sole proprietorship and partnership firms. Most complicated as compared to sole proprietorship and partnership firms. Most complicated as compared to private limited company
Risk Risk is very high. Risk is high. Risk is low as liability is limited. Risk is low as shareholder’s liability is restricted to unpaid calls only or any specified amount of guarantee in case of co. limited by guarantee. Risk is low as liability is limited. Risk is low as liability is restricted to shareholding amount and unpaid calls only.
Transferability Cannot Transfer, only in case of death of proprietor New partners can be admitted and old partners can resign New partners can be admitted and old partners can resign Shares can be transferred with restrictions to public There is restriction of transfer of shares subject to change in nominee and directors Shares can be easily transferred without restriction.