Proprietorship Registration

Proprietorship Registration

The simplest and oldest type of business structure to establish in India is the sole proprietorship. One individual, known as the proprietor, owns, runs, and controls a proprietorship, a particular sort of business. It is quite simple to get started, and there are only a few compliance needs because the proprietorship and proprietor are one and the same.

A proprietorship is an entity in which the proprietor and the business are one and the same, hence it cannot have any other partners or stockholders. Additionally, the owner of the sole proprietorship is not protected against limited liability arising from commercial activity. As a result, every small business with no more than 5 employees is ideally suited for this sort of corporate structure.

Who is a sole proprietor?

Ownership of a proprietorship business is solely held by a solitary proprietor. As a result, a business will be carried forward by opening a new bank account for it, and GST registration will be completed using the proprietor's PAN and Aadhar. All the company's assets and liabilities are entirely the proprietor's responsibility.

How to check proprietorship status?

The sole proprietorship does not need to be registered in India. As a result, there is no system in place to check the status of a sole proprietorship. On the other hand, if a proprietor has applied for GST registration, the GST registration and filing status of the proprietorship can be checked on the GST Portal to confirm the proprietorship's existence.

Proprietorship legal entity status and recognition

Proprietorships are not specifically recognised as distinct legal entities. For all legal and governmental reasons, the proprietorship and the business owner are therefore regarded as being the same.

Sole Proprietorship Registrations & Licenses

The owner will need to obtain PAN and Aadhar in order to operate a proprietorship firm in India. In addition to opening a bank current account, the proprietor must register for UDYAM and GST. A Shops & Establishment Act registration may also be required in some states by the owner.

In addition to the aforementioned fundamental needs, extra licences and licences can be necessary depending on the sector, the state, and the local laws.

Advantages of Proprietorship

Easy registration: Because the sole proprietor is the same person who owns the business, there is no official incorporation or dissolution process for a sole proprietorship. To be in compliance with Indian rules and regulations, the owner may need to acquire specific registrations and licences in order to operate a business.

Lower compliance: The compliance load will be reduced because the majority of proprietorships are simply registered with government agencies like Income Tax & GST. However, organisations like LLPs and companies must register with the Ministry of Corporate Affairs in order to operate, and they are required to submit a number of statutory reports as well as have an annual audit performed by a Chartered Accountant.

Simplicity:No partners, shareholders, or directors exist, therefore the proprietor can easily run this business with the fewest number of legal paperwork and consents needed. In light of this, very small enterprises are best suited for this form of business structure.

Business decision: A proprietorship is a business where all decisions are made by the owner. It is not necessary to obtain anyone else's permission or consent. Consequently, a business owner is typically able to make swift decisions on his commercial affairs.

Complete control: due to the fact that a sole proprietorship has one owner. The assets, income, expenses, and all corporate operations are completely in his or her control.

Disadvantages of Sole Proprietorship

Funding: Only one person's savings, borrowing capacity, and credit history are used in this sort of business organisation. In this form of business structure, there are no other participants, so obtaining bank financing will be quite challenging. Because this sort of corporate entity does not permit profit sharing or shareholding, raising equity money will not be viable.

Personal liability: In a sole proprietorship, the owner's personal assets may be seized or encumbered if they are unable to pay business debts or taxes. Consequently, with this kind of corporate structure, the owner will be held personally liable until all liabilities are satisfied.

Business continuity: The sole proprietorship will be automatically dissolved in the event of the business owner's death or disability. There won't be any business continuity as a result.

Growth: In terms of liability, fundraising, and business continuity, a proprietorship is subject to a number of limitations. As a result, only extremely tiny enterprises in the unorganised sector run as proprietorships.

Unincorporated business: Businesses that are not incorporated are sole proprietorships. As a result, it is impossible to check if a sole proprietorship is active or not using a centralised database. Sole proprietorships are typically categorised as unorganised commercial entities.

Registering a Proprietorship Online through IndiaFilings

You can easily register a proprietorship online through IndiaFilings. To register a proprietorship, only the PAN & Aadhaar card of the business owner is required. We can help you obtain the following registrations in less than 15 days:

• GST Registration
• UDYAM Registration
• Zero-Balance Business Current Account with LEDGERS Accounting Software

Once you have registered for the proprietorship registration on IndiaFilings, please follow the steps below and upload the following documents by logging into LEDGERS.

• Step 1: Login to LEDGERS using the email address for payment.
• Step 2: Go to Services Tab & Select Proprietorship Engagement
• Step 3: Upload your PAN & Aadhar Card Copy
• Step 4: An IndiaFilings Registration Expert will file the registration application with GST Department, MSME Department and Bank for Current Account.
• Step 5: Access to LEDGERS Accounting Software is provided for GST invoicing, GST filing and other services.

PAN Card for Proprietorship Firm

A proprietorship is not a separate business entity. Hence, there is no procedure to obtain proprietorship PAN card. The PAN card of the business owner is used for the proprietorship.

Obtaining GST Registration for Proprietorship

GST registration for a proprietorship will be obtained by IndiaFilings as a part of the service. The following documents are required for GST registration:

• Permanent Account Number (PAN) of Proprietor
• Digital Signature Certificate of the Authorized Signatory
• Consent by Proprietor for obtaining GST Registration
• Photograph of Proprietor and Authorized Signatory
• Bank Account Details: A scanned copy of a cancelled cheque with the business entity's name, bank account number, MICR, IFSC, and branch information.
• Declaration / Authorization to Authorized Signatory
• For commercial purposes, the rent / lease agreement should be in the name of the proprietor.
• Additional documents such as Aadhaar Card, Driving Licence, Passport, or Voter ID in the name of the Owner with the complete address of the premises should also be provided if the address on the ownership document (Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill) is incomplete.

Obtaining UDYAM Registration for Proprietorship

Udyam Registration can be obtained online to avail various benefits available for small and medium sized businesses. Once the GST registration is obtained, the IndiaFilings team would help obtain UDYAM registration by submitting Aadhaar card, PAN card and GST certificate to the Government.

Bank Account for Proprietorship

The bank current account for a proprietorship will be opened in the name of the business owner using his/her PAN. The business owner will have to submit proof for doing business. Any two of the following documents can be submitted to create a current account instead of savings account in the name of proprietorship:

1. GST registration certificate
2. Shop & Establishment Act license
3. License issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities,
4. Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening a bank account etc.

Obtaining Shops & Establishment Act License for Proprietorship

From state to state, the process for acquiring a Shop and Establishment registration certificate changes. It is available both online and offline. In most states, Shop and Establishment Act registration can be obtained within 2-3 weeks.

Timelines for Sole Proprietorship Registration

A sole proprietorship can normally be registered in India through IndiaFilings in less than 15 days. However, the timelines for registration will vary from case to case depending on the government and bank processing timelines.

Proprietorship Business Activities

The majority of the sectors and industries allow proprietorships to engage in every form of economic activity that an Indian individual may. However, other industries, such as banking, insurance, financial services, lending, defence, and telecommunication, call for specialised clearance. In these circumstances, a business is compelled to seek out numerous government permits. In light of this, proprietorship business structures are only appropriate for small-scale commercial activities.

Compliances for Proprietorship

The following are some of the compliances that are applicable for a sole proprietorship:

Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.

Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.

GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.

TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold - tax must be deducted at source and TDS returns must be filed every quarter.

In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.

Proprietorship vs Limited Liability Partnership (LLP) vs Company