Want to know about how to register proprietorship firm in India?

Let’s first start with a story.

Mr. Kunal, a trader by profession, wanted to start own business in India, he first researched about various legal business entities available in India.
 
He chooses Proprietorship Firm after discussing with Professional Chartered Accountants.
 
Following are the Reasons:
  • Sole Proprietorship is one of the easiest forms of business. This is the main reason why most of the small business and startup choose to start with.
  • Minimal Regulatory Compliance which means he can concentrate on expanding his business.
  • Limited Capital Investment.
  • He can keep all the profit with him since he doesn’t have partners to share with. The only drawback is, in case of loss he alone has to bear the losses.
  • The Startup cost for the sole proprietorship is limited.

He does not have to go through GST registration procedure because his turnover is under 20 Lakh.

Mr. Kunal started his Proprietorship Firm like a pro!

What is Proprietorship?

A proprietorship is also known as “sole proprietorship”, “sole trader” or “individual proprietorship”. It is a type of legal entity which managed and controlled by one person called as sole proprietor of the firm.
 
The sole proprietor is accountable for all the profits and losses of the business with unlimited liability.
 
Proprietorship’s do not offer the promoter, a host of benefits such as limited liability, corporate status, separate legal entity, independent existence, transferability, perpetual existence – which are desirable features for any business.
 
Proprietorship firm registration is only suited for small businesses which have limited presence.

Minimum Requirements to register a Sole Proprietorship Firm in India

Minimum Requirements For Proprietorship Firm Registration In India
Minimum Requirements For Proprietorship Firm Registration In India

In order to register proprietorship firm following are the minimum requirement you need to have with you:

1. PAN CARD

In order to file income tax returns, make payments and even for the opening bank account you need to have a PAN Card. You can apply for PAN Card Online. For assistance contact here.

However, PAN Card for Proprietorship Firm is not mandatory, as you can register your Proprietorship Firm with your own PAN Card also.

2. Current Bank Account: 

Bank Account in the name of your sole proprietor business. Contact your bank for opening the account.
Benefits of using Current Accounts for business:
  • Having a Current Account will help in keeping your business transactions and personal transactions separately.
  • Current Account can be used as business proof.
  • There are no limitations for cash deposits and cash withdrawals from your Current Account(some bank may charge cash handling fees)
  • You can take GST Credit for GST Paid on Bank service charges( for this you have to submit your GST Number to the bank)
  • Current Account can be converted to Overdraft Account if you require additional funds for the day-to-day operations of your business.
 3. GST Number:
GST Number is only required if your turnover above 20 Lakh otherwise it is not required.

Procedure for a Sole Proprietorship Firm Registration in India

To register a Sole Proprietorship Firm in India, one doesn’t require any Government Registration. It requires various other tax registrations as per the rules and regulations. For instance, Aadhaar Udyog or GST Registration can be obtained in the name of the Proprietor to establish that the Proprietor is operating a business as a sole proprietorship.

Want a hassle-free process?

Don’t worry we will help you with each and every step while setting up your proprietorship firm. Talk with our experts here.

"Procedure

Step 1: Name Selection 
A name is selected in such a way that it does not infringe upon Trademark of any other company. For this reason, it is checked with the Trademark Department.
Step 2: MSME Udyog Aadhar Registration
Udyog Aadhar is a 12 digit number given by MSME Government of India. Udyog Aadhar provides various benefits from the government such as subsidiaries, loans, schemes.  You can register for Udyog Aadhar on Udyog Aadhar Registration Site. 

Follow these steps to register your Udyog Aadhar.

Step 3: GST Number Registration

GST Registration is another way you can register proprietorship firm. It has replaced the Old Service Tax and Vat Registration.

If the sole proprietor has the turnover less than 20 lakh, then it is not mandatory for him to get GST Registration.

You can apply for GST on GST Portal.

Documents required for Proprietorship Firm Registration in India

Following are the documents required to register Proprietorship Firm In India:

  • For MSME Udyog Adhaar Registration
Documents required for MSME Registration
Documents required for MSME Registration
  1. Copy of Adhaar Card.
  2. Copy of PAN Card.
  3. Bank Statement or Cancelled Cheque.
  • For GST Registration:
Documents required for GST Registration
Documents required for GST Registration
  1. PAN Card.
  2. Adhaar Card.
  3. Canceled Cheque.
  4. Passport Sized Photo.
  5. Address Proof ( Electricity bill and NOC Letter or Rent Agreement).

5 Advantages of Sole Proprietorship Firm in India

  • Easy to start

To register proprietorship firm in India, you don’t have to go through a tedious process. Proprietorship needs minimal registration. Therefore, it is one of the simplest types of business entity to go with at the initial phase of the business. You simply have to open the bank account and start your business. There are no legal formalities such as ROC Filings and Board Meetings.

  • Simple Structure

Proprietorship firm structure is very simple. You can start anywhere you want to. Even you can start your firm, at your residential address if you don’t have the proper office.

  • Tax Benefits 

Being a sole proprietor, you can enjoy tax benefits. You can file the return on your personal name, don’t have to file the separate return on the business name. If your income is less than 3 Lakh, you don’t have to pay any income tax. But there are some tax deductions which proprietor cannot enjoy.

  • Single Promoter

To register proprietorship firm in India, it doesn’t require the director or nominee. Because Proprietorship is an only type of legal entity which is operated by the single person only whereas in case of one person company (OPC) it is required to have one director. In LLP and partnership firm it is required to have two promoters.

  • Easy To Wind Up 

Winding up or Closing up procedure for proprietorship firm in India is very easy. Only tax registration obtained in the name of the business is to be canceled.

Proprietorship Firm Registration Fees

There are no government fees involved in Proprietorship Firm Registration. If you take help from the CA then it can involve fees.

    FAQs on how to register Proprietorship Firm In India

Q1. What is the minimum amount of capital required to start the Proprietorship Firm?

There is no minimum capital required. A proprietorship business can be started with any amount of capital as per the requirement of your business.

Q2. Does a sole proprietorship firm need a certificate of incorporation?

No, sole proprietorship firm doesn’t need a certificate of incorporation. The legal identity of proprietorship as an entity is determined through various other registration or licenses obtained in the name of the proprietorship firm like GST certificate, etc.

Q3. Who can be a Proprietor?

Any Indian Citizen with the current bank account can be a proprietor. However, to open a current account, banks typically require a Shops & Establishments Registration.

Q4. What documents are required to open a Current Account in a Bank?

To open a current account, a Shops & Establishments Act Registration, GST certificate. And for Address proof, PAN Card and other identity proofs are required.

Q5. Does sole proprietorship need a Business PAN?

It is not necessary. The main advantage of Sole Proprietorship is that you can start your Proprietorship firm which the help of your own PAN Card.

Q5. Can Proprietorship Convert to Private Limited Company or LLP?

This is an advantage, you can convert proprietorship to Private Limited Company or LLP for tax deductions benefits.

Q6. Can I use a Personal Savings Account for a new startup as a Sole Proprietorship?

As per Saving Bank Account Rules, Saving Account can be used only for bonafide personal savings only.

For business purposes, only the current account can be used.

The issue with using Personal Saving Account in business:

  • In Saving Account there are limitations on the number of transactions that can be done in a month.
  • The charges of cheque collection, cash deposition and other service charges which are levied in Saving Account which are exempted in many banks.
  • There is a limitation on the number of cheque books that can be availed for saving accounts, however, in Current Account, there are no such limitations.

Q7. What process one needs to follow while registering Proprietorship Firm in India For E-commerce Business?

There is no different procedure to register Proprietorship Firm for E-commerce Business. You have to follow the same procedure only important thing you are required to do is registration of GST is compulsory for an E-commerce Business.

Q8. Is there is a way to register proprietorship as a separate entity, instead of person only?

Yes, you can choose OPC (One Person Company) for this.

The biggest difference between a sole proprietor and a One Person Company would be that in case of a One Person Company, your liability in case the business fails, is limited to only the business assets. In case of a proprietorship, the liability is unlimited and the creditors of your business can even take hold of your home and personal assets like your house, personal bank accounts, jewelry etc which can be used to settle the business liabilities.

Q9.  How to start Proprietorship Firm in Maharashtra? What to do first? Is GST Number necessary?

To start Proprietorship Firm in Maharashtra, you have to follow these same steps described in article i.e MSME Registration or GST Registration. GST Number is only recommended only if turnover crosses 20 Lakhs. You will require the same documents.

Q10. If Proprietorship Firm registers for GST, will the legal business name will be same as his?

Yes, the legal business name should be same. To register Proprietorship Firm you will need PAN Card. The name on the PAN Card should be same as your legal name you cannot change it.

Q11. As a Sole Proprietor, how many companies you can operate by your name?

As a sole proprietor, you can operate as many numbers of companies you want. But, if your multiple companies overall turnover crosses more than 1 crore then, you will be required to do tax audit and you will be required to take GST in case turnover crosses 20 Lakh.

Conclusion

To register proprietorship firm in India, it requires minimal efforts since no Government Registration is involved. So, if you are the one who is thinking to start your own business and doesn’t have the partners or required office we recommend you to choose proprietorship. Then after few years of business, depending on the capital and expansion you can easily convert into private limited or LLP or OPC and avail the benefits of tax deductions.

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Subrato Mukherjee

I am Professional CA with experience of more than 10+ years. My aim is to help startups and companies to help in various financial needs which is needed to expand the business.

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  • We are a group of volunteers and opening a new scheme in our community. Your website offered us with valuable info to work on. You’ve done a formidable job and our entire community will be thankful to you.

Subrato Mukherjee

I am Professional CA with experience of more than 10+ years. My aim is to help startups and companies to help in various financial needs which is needed to expand the business.

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