Proprietorship Firm Registration

Sole proprietorship concern

There is no separate cost to establish a sole proprietorship. A sole proprietorship is established when an owner begins operating his business with opening of current account on his own name or in the name of proprietorship firm. There are no separate licenses to obtain to form a sole proprietorship. The sole proprietorship will be maintained so long as the owner keeps doing business.

This is preferred for small traders.

Licenses may be obtain for Sole Proprietorship

Proprietorship concern to run through smoothly may voluntarily take following license/ registration

• Trade License
• Shop & establishment Registration
• MSME registration or Udhyog Adhar
• PAN/TAN Registration
• GST Registration
• FSSAI Registration
• Import Export Code

Why the concern should take the above mentioned license/ Registration

• MSME registration will help in government affiliated project and benefit of concessional fee in many case such as bar code application, trademark application etc.
• Trade license and shop license is compulsory by law to be taken if not taken than will be liable for penalty and its necessary to take these license as legal compliance.
• GST registration when crosses threshold limit. (It can be take voluntary also)
• TAN/PAN of business Organisation
• FSSAI is to be taken when owner is involved in business of Food.
• Import export code is to be taken when involved in any export / import of goods/ services.

Documents Required for Sole Proprietorship

• Aadhar card
• pan card
• Passport size photograph of owner
• Registered premise proof-
• Rent Agreement & latest month electricity bill (if rented)
• Electricity Bill (if Owned)/ Property tax receipt
• Photo of shop with name of firm
• Contact Number
• E mail Id

Government Fees for Sole Proprietorship

• Trade License- As prescribed by the nature of the business
• Shop & establishment Registration: As per detailed below

• MSME registration or Udhyog Adhar – Nil
• Pan Card – Rs. 109
• Tan – Rs. 65
• GST Registration- Nil
• FSSAI Registration- For Basic Rs. 100 per year
• Import Export Code: Rs. 500

Income tax (Taxation) for Sole Proprietorship

• Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of 4% of such income-tax and surcharge.

Advantages for Sole Proprietorship

• Sole proprietorships have functional advantages that it has easy operations & set up as compared to other form of businesses.
• It has Tax advantages compared to other form of businesses. The income of the proprietorship Firm is included in the income of its proprietor itself. Hence slab based income tax rates apply, which results in a substantial tax benefit.
• The proprietor of firm maintains full control and ownership of the business. He is only the sole person to manage and operate a business .
• The proprietor can easily close it’s business in case of any adverse circumstances by surrendering all registration previously obtained.
• The sole proprietorship can have only one owner, and that owner is entitled to the profits of the business and rapid decision making in firm
• The cost of start up is very low as compared to other business entities structure.
• The sole proprietorship have minimum compliances and no boundation on amount of capital introduce.
• A proprietorship with income of less than Rs. 2 Lakhs per annum is not required to pay income tax.

Disadvantages for Sole Proprietorship

• The sole Proprietorship Liability is unlimited . In case any loss or liability is created by the Proprietorship business, the Proprietor would be held personally liable for payment.
• It also doesn’t have perpetual existence which means in case the Sole Proprietor is no more - the existence of the Sole Proprietorship business would also comes to an end.
• A Sole Proprietorship does not have a separate legal entity which means owner and firm are one of the same.
• The sole Proprietorship is not flexible in case of transferability because all license or registration are obtained in the name of the Proprietorship which are linked to the PAN of Proprietor and which cannot be transferred to any other person.
• It face difficulty in fund raising from Angel Investors, Venture Capital firms and Private Equity funds and Banks also put restrictions on amount of funding.