What is a Sole Proprietorship Firm and How to Register?

What is a Sole Proprietorship Firm and How to Register?

What is a sole proprietorship?

Proprietorship in India is a type of unregistered business entity that is owned, managed, and controlled by one person. The micro and small businesses that are operating in the unorganized sector prefer registering as a proprietorship in India. It is very easy to start a sole proprietorship in India as it has very few regulatory compliances for conducting businesses. Proprietorship registration is ideal for the entrepreneurs who are getting into the business for small businesses with very few clients. The liability of the sole proprietorships is limited and they also do not have perpetual existence.

Who is a sole proprietor?

A sole proprietor is the owner of the sole proprietorship, he is recognized as an entity same as the business. As the sole proprietor is the owner of the business he is entitled to all the company's revenue. The sole proprietorship is completely under the control of the proprietor. Hence, he makes the decisions for the company.

To run a business as a sole proprietor some licenses and permits are required. The license will depend on the industry, state, and locality.


What documents are required to register a sole proprietorship in India?

The process of proprietorship registration in India can be done online. All you need to do is submit the following documents:

  • Identity Proof of the applicant - Aadhar and the PAN Card.
  • Address Proof of the applicant - Latest Bank Statement
  • Passport size photos.

TAXAJ can help you in obtaining a sole proprietorship in India in just 5-7 working days.


How can TAXAJ help you in obtaining proprietorship registration in India?

The process of registering for a Proprietorship in India is completely online. There is no need to submit the documents manually. TAXAJ has helped thousands of entrepreneurs to obtain proprietorship registrations in India.

  • Once we receive a request our incorporation expert gets in touch with you and briefs you on the whole process. The expert will also guide you about the documents that are required to be submitted.
  • Once the documents are submitted and the payment is initiated the process of registration begins.
  • A relationship manager is assigned in the process who will guide you at every step.
  • We can help you in obtaining the proprietorship registration in India within 8-10 days subject to the document submission.

Checklist for obtaining Sole proprietorship registration

  • A certificate is issued by the municipal authorities under the shop and the establishment Act.
  • A license that is issued by the registering authorities like the Certificate of Practice that is issued by the Institute of Chartered Accountants of India.
  • The registration or the licensing document is issued in the name of the proprietary concern by the central government or the state government authority or the department.
  • The complete tax return in the name of the sole proprietor where the firm's income is reflected duly authenticated and acknowledged by the Income Tax Authorities,
  • The utility bills such as electricity, water, and the landline telephone bills in the name of the proprietary concern.
  • Issue of the GST registration or the certificate.

  • What are the benefits of registering as a proprietorship firm?

There are various reasons why one should register as a proprietorship firm. Here are some of them:

  • Complete Control- Proprietorships firms are owned and operated by just one person. The owner has full authority and can make all the decisions as no partners are involved to consult.
  • Easy Setup- As no registrations are required to start, a proprietorship can create and receive payments from clients very easily
  • Easy Compliance- The significant advantage of the Proprietorship is that it doesn't require any additional compliance in most cases.
    The PAN of the Proprietor and Proprietorship are the same.
    Hence, in most cases, only income tax returns in the form of ITR3 must be filed every year.
  • Dissolution- If an individual has to cease operation, he does not have to wind up the company significantly. This undoubtedly saves time.
  • Requires less investment- Registering a proprietorship in India requires very little investment. Hence, anyone who wants to start a business with low funds can go for proprietorships as no investments are involved.
  • Information is not disclosed in public- The Proprietorship firms' financial reports are public like that of the LLPs, where the financial statements are made public.

What are the post-incorporation compliances for the sole proprietorship firms?

The proprietorships registered in India are required to file income tax returns. As the proprietors and the proprietorships are the same the income tax return filing for the proprietor and proprietorship is the same.

Under the Income-tax Act, all the proprietors below the age of 60 will file ITR only if the total income exceeds Rs. 2.5 lakhs. If the proprietor is over 60 years and below 80 years, he should file ITR only if his income exceeds Rs. 3 lakh. Proprietors over the age of 80 years are required to file income tax if the income exceeds Rs. 5 lakh.

At TAXAJ we offer expertise in Income tax return filings for several small and medium-sized proprietorship firms across the country. Get in touch with a TAXAJ Tax Expert to file the Income-tax return for your Proprietorship today.

Audit for Proprietorship

An audit is required for the proprietorship firms if the total sales are over Rs. 1 crore during the financial year.

In a professional case, an audit is necessary if the total gross receipts are more than Rs.50 lakhs during the financial year assessment.

Also, an audit is required for any proprietorship firm under a presumptive taxation scheme irrespective of turnover if the income claimed is lower than the deemed profits and gains under the scheme.

Audit for Proprietorship for income tax purposes must be conducted by a practising Chartered Accountant.

    • Related Articles

    • Sole Proprietorship Registration Timeline

      A Sole Proprietorship form of business organisation is where a business is managed by a single person. Generally, it does not require any registration as such. Any individual who wants to start a business with less investment can choose this type of ...

    • Sole Proprietorship Registration Procedure & Advantages

      Sole Proprietorship Registration Procedure & Advantages A Sole Proprietorship form of business organization is where a business is managed by a single person. Generally, it does not require any registration as such. Any individual who wants to start ...

    • How to transfer Proprietorship Firm to another person?

      A sole proprietorship business is the easiest form of business to start, but it can be one of the most complicated to sell to another party. Starting a sole proprietorship business involves no formal paperwork and no separate income tax return since, ...

    • Income Tax Return Filing Date for Proprietorship Firm

      Proprietorship Tax Return Filing – eFile Procedure Like any other incorporated entities such as partnerships and companies, a proprietorship also must pay tax on its revenue. In the legal sense, a proprietorship is treated like the proprietor ...

    • Post Incorporation Compliances for Proprietorship Firm or After GST Registration

      Post Compliances for Proprietorship Firm/GST Incorporation compliances are typically associated with the registration and ongoing requirements of companies, rather than proprietorship firms. Proprietorship firms are typically owned and managed by a ...