Includes GST Registration & Udyam / MSME Registration. Inclusive of all Government Fee and Taxes.
Proprietorship is one of the most common and oldest forms of businesses in India. It is a one man organization where a single individual owns, manages and controls business. The most important feature of proprietorship is that it is very easy to start. There is no mechanism provided by the Government of India for Registration of a Proprietorship. The Sole Proprietorship firm enjoys some benefits like no registration or agreement is required to start and easy to close. On the other hand sole proprietorship does not provide some other benefits such as independent existence, transferability, separate legal entity, limited liability etc.
Start your Sole Proprietorship with the help of Ofin
Proprietorship business does not require any registration so our Business Consultant will guide you on what kind of other registrations required and how to establish the identity of a proprietorship.
There is no separate registration or PAN card of a sole proprietorship. The Income Tax returns of a Proprietorship are filed in the name of the owner. However the sole proprietorship has to register itself with different Government authorities depending upon the line of business.
At Ofin we help you to establish new proprietorship by obtaining the required registrations.
How much does it cost to start a Proprietorship in India?
Advantages of a Sole Proprietorship
There are many reasons why a person would choose to start his business using a sole proprietorship. Advantages of a Proprietorship include:
- Starting a sole proprietorship is much easier and less complicated than starting any other type of business, and also much cheaper. Proprietorship can be named after the name of owner, or a fictitious name can be used to enhance the business marketing or any name of owner’s choice.
- The owner of a sole proprietorship does not have to file a separate business tax return. Instead, the business information and figures will be listed in individual return. The business will be taxed at the rates of personal income tax and not at corporate tax rates. The owner will get benefit of all the deductions which are allowed to an individual by the income tax.
Disadvantages of a Sole Proprietorship
Starting a sole proprietorship may be easy and hassle free but there are some disadvantages to start a business in the name of sole proprietorship.
- Though formation of Proprietorship is considered easy, the Banks now a days ask for registration documents which can only be GST Registration Certificate. It becomes and expensive affair for a small business which has turnover less than the GST threshold limit as the business will have to spend on GST compliance for the year.
- The owner and the business is not treated separately in a sole proprietorship. The owner is made responsible for all the debts, losses or violations coming from business. For example if the business must pay any debts or losses, it will be satisfied from the owner’s personal funds.
Lack of continuity:
- The business does not continue if the owner becomes incapable of running the business. Sole proprietorship does not have perpetual succession.
Difficulty in raising capital:
- Since the initial funds are generally introduced by the owner, sometimes it can be difficult to get capital. It’s not possible for a sole proprietorship to raise capital by way of diluting shares. Banks are also reluctant at times to give advances to Proprietorships.
FAQs about Proprietorship
If you are planning on starting a proprietorship, you should be fully aware of various pros and cons that are involved in such a business. It would be a wise decision to consult Ofin before you start a proprietorship. Also a consultant can help you calculate risk involved and help determine whether a proprietorship is the right business structure for you.
A proprietorship can have only one promoter. Therefore only one person is required to start a proprietorship.
The promoter must be an Indian citizen and Resident of India. NRIs and Persons of Indian Origin can start a Proprietorship only with prior approval from RBI and Government of India. Profit earned through Proprietorship in this case cannot be repatriated.
PAN card of the promoter, one identity and one address proof should be enough to start a proprietorship. Basically the Documents required for GST Registration and Bank Account opening are the only documents required for starting a Proprietorship.
There isn’t any limit on minimum capital requirement for starting a Proprietorship. A Proprietorship can be started with any amount which the promoter thinks is required to start new business.
Ofin business consultant team will understand your business requirements and help you start a Proprietorship by obtaining required registrations. Ofin team will guide you to open your bank account in the name of your Proprietorship and apply for your required business registrations.
Reserve Bank of India mandates that the proprietor should provide proof of existence of a Proprietorship alongwith PAN Card, identity proof and address proof of the Proprietor. The proof of existence of Proprietorship can be any of these: GST Registration, Udyam or MSME Registration, Shop & Establishment Certificate or any other documents as provided in Reserve Bank of India’s KYC norms.
No, the Proprietorship does not have a separate legal identity. Proprietor and Proprietorship are one and the same. Proprietorship does not have a separate PAN Card. PAN Card of the proprietor will be the PAN Card of Proprietorship. Tax Filing of Proprietorship is done in the name of proprietor. Assets and Liabilities of Proprietorship are that of proprietor. Therefore, there will be no separate legal identity for the business.
Since Proprietorships are neither incorporated nor registered anywhere, they do not have Certificate of Incorporation or Registration. The identity of a Proprietorship is established by registering it with applicable and relevant Government authorities e.g. GST Registration or Udyam Registration.
There is no registry or regulation for registering the name of a Proprietorship. Therefore, proprietorship can be named after anything as per the choice of the proprietor but should not infringe registered trademarks. Since there is no registry or regulation for registering name of a Proprietorship, the only way to ensure exclusive use of the name is to obtain a trademark for the business name.
Ownership of Proprietorship cannot be transferred to any other person unlike a Private Limited Company by way of transferring shares or a Limited Liability Partnership. However the assets of a Proprietorship can be transferred to other person through sale or any other mode as prescribed by law. Government licenses and registrations of a Proprietorship cannot be transferred.
No, proprietorship is a type of business which is owned by a single individual; it is controlled and managed by the proprietor only. You cannot add partners to a Proprietorship.
No, Proprietorships are owned, controlled and managed by only one person. Therefore a Proprietorship cannot issue shares to the investors.
There are not many compliances of a Proprietorship. The proprietor has to file income tax return with the Income Tax authority every year. Other compliances such as GST return filing or PF and ESIC etc may be necessary depending upon the nature and size of business.
Audit is not compulsory for all Proprietorship. Audit is necessary only for those Proprietorships which fall under the audit criterion under different laws.
Yes, there is a procedure prescribed to convert a Proprietorship to a Private Limited Company or a Limited Liability Partnership.