If you are planning to start a proprietorship firm then you have come to the right place. Know the procedure for the same.
What is Proprietorship?
A sole proprietorship is the simplest way to start a business in India. It is owned and run by one person. This individual assumes full control of the business. The administrative burden is minimal. However, there are drawbacks. There is no opportunity for partnerships and no protection for personal assets in case of business issues. This structure is most suitable for very small businesses with fewer than five employees.
The benefits of Proprietorship are as follows:
A sole proprietorship is easy to start because it doesn't involve formal paperwork. However, some licenses might be needed to follow the rules.
Compared to other types of businesses, sole proprietorships have fewer rules to follow.
It is simple because there are no partners or directors. Small businesses work well with this structure.
The owner makes all the decisions without needing approval from others.
The owner has total control over everything in the business, like money, assets, and operations.
Sole proprietors often enjoy tax advantages, such as the ability to deduct business expenses from their personal income, potentially reducing their overall tax liability.
The way a company is legally structured affects how it is taxed. A sole proprietorship is taxed like an individual.
Tax & Process
Income Tax Filing: Proprietors must file personal income tax returns using forms ITR-3 or ITR-4.
Business Income: Declarations of business income are only allowed through ITR-3 and ITR-4 forms, making them necessary for all proprietorships to maintain tax compliance.
GST Return Filing: If a proprietorship is registered for GST, monthly or quarterly GST returns must be filed according to the chosen scheme.
TDS Returns: Proprietorships with employees or significant purchases must deduct taxes at source and submit TDS returns every quarter.
Additional Compliance: Depending on their industry and location, proprietorships may be subject to various other compliance requirements.
Stay Compliant: Proprietorships must adhere to these tax regulations.
The following documents are required:
An Aadhar Card is required for registration
The Pan Card of the owner is required for registration
The photograph is also a must for the registration/
Utility bill of the business place such as water bill or electricity bill
Bank statement copy and other details such as account number and IFSC code
Applicants can avail of GST registration by submitting relevant e-application on the GST portal.
Any other document that is requested needs to be furnished.
Step 1: Apply for the Adhar card. Apply for a PAN card if you don't have one. If you already have a PAN card, proceed to the next steps.
Step2: Choose a name for your sole proprietorship business
Step 3: Open a bank account in the business's name. All business transactions should go through this account.
Step 4: Basic Registrations for Sole Proprietorship have to be followed
Step 5: Although specific registration isn't mandatory, some essential registrations are required for a sole proprietorship:
Whose name should the PAN card for a sole proprietorship firm be obtained in?
The PAN card for a sole proprietorship is issued in the owner's name since the business and owner are not legally separate entities. The owner can use their personal PAN for the business.
Should the bank account be in the name of the sole proprietorship firm?
Yes, a bank account must be opened in the name of the sole proprietorship business. All business transactions should be conducted through this account.
What is the registered office proof for an e-commerce/online business?
For an e-commerce/online business, you can use a rented office space as your registered office. The rental agreement and a No Objection Certificate (NOC) from the owner will serve as your registered office address proof. If you operate your online business from home, your house address or a commercial electricity bill in your name can be used as the registered office address proof.
I have started a sole proprietorship business from my house? What is the registered office proof?
If you run your sole proprietorship business from your house, your house address serves as the registered office proof. If your house is rented, provide the rental agreement and a NOC from the owner. For a business operated from your own house, you can submit a commercial utility bill (e.g., electricity or gas) in your name or delivery/dispatch receipts with your home address as proof of the office address.
Which are the mandatory licenses to be obtained for a sole proprietorship?
Generally, a sole proprietorship doesn't require specific registrations. However, the basic registrations typically needed include:
• Registration Certificate under the Shops and Establishment Act of the state where the business operates.
• GST registration.
• MSME registration.