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Registration of Sole Proprietorship

  • Easy and Quick Registration
  • Tax Benefits
  • Management Simplicity
  • Suitable for Small Businesses

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Registration of Sole Proprietorship

A sole proprietorship in India is a business structure owned and operated by a single individual, often chosen for its simplicity and ease of setup. This type of business does not require formal registration, but it is typically identified through alternative registrations such as GST. The registration process involves obtaining various documents and licenses, such as a certificate under the Shop & Establishment Act, an Importer Exporter Code (IEC), and GST registration. Despite the ease of setup, sole proprietorships have unlimited liability, meaning the owner is personally responsible for all debts and obligations of the business.

Compliance requirements for sole proprietorships include filing personal income tax returns, GST returns, and TDS returns if applicable. Additional compliances may be necessary depending on the nature of the business, such as industry-specific regulations and local permits. Vregister Startups offers streamlined services for registering a sole proprietorship, providing expert consultation, vendor coordination, and ensuring timely completion of the registration process. Sole proprietorships benefit from minimal compliance, full control by the owner, and cost-effectiveness, making them a popular choice for small businesses and individual entrepreneurs.

Table of Content

What is Registration of Sole Proprietorship in India?

A sole proprietorship is a type of business structure where the business is owned and operated by a single individual. In India, sole proprietorship registration is suitable for businesses with only one owner, who manages profits and income tax under their own name or a trade name. This structure is commonly chosen by small businesses and individual entrepreneurs due to its simplicity and ease of setup.

When a business is owned and governed by one person, it is referred to as a sole proprietorship company. This type of business can be incorporated relatively quickly, typically within fifteen days, making it a popular choice, especially among merchants and small traders operating in the informal sector. Unlike some other business structures, such as partnerships or corporations, sole proprietorships do not require formal registration. Instead, they are typically identified through alternative registrations, such as GST registrations.

However, it’s important to note that while sole proprietorships offer simplicity and flexibility, they also come with certain drawbacks. One significant drawback is that the owner’s liability is unlimited, meaning they are personally responsible for all debts and obligations of the business. Additionally, sole proprietorships do not have perpetual existence like corporations; they cease to exist upon the death or withdrawal of the owner. Despite these limitations, sole proprietorships remain a popular choice for small businesses and individual entrepreneurs due to their ease of setup and operation.

Sole Proprietorship Registration Checklist

When registering a sole proprietorship, certain documents and certificates are typically required to complete the process. Here’s a checklist of items commonly needed for sole proprietorship registration:

  1. Certificate or License Issued by Municipal Authorities Under the Shop & Establishment Act:
  • This certificate serves as proof that the business is established and recognized by local municipal authorities.

    2.  License issued by Registering authorities like the Certificate of Practice issued by the Institute of Chartered Accountants of India:

  • This license demonstrates professional qualifications or certifications relevant to the business activities.

    3.  Registration or licensing document issued in the name of the proprietary concern by the Central Government or the State Government Authority/Department, etc.:

  • This document validates the legal existence of the sole proprietorship and its authorization to operate within the jurisdiction.

    4.   Importer Exporter Code (IEC) issued to the proprietary concern by the office of the Directorate General of Foreign Trade (DGFT):

  • The IEC code serves as an identity document for international trade transactions and may be required for certain business activities.

    5.    Complete Income Tax return online (not just the acknowledgement) in the name of the sole proprietor:

  • This authenticated income tax return reflects the income earned by the sole proprietorship and is acknowledged by the Income Tax Authorities.

    6.    Utility bills such as electricity, water, and landline telephone bills in the name of the proprietary concern:

  • These bills serve as proof of the business’s physical address and utility usage, further establishing its existence.

    7.  GST Registration/Certificate:

  • Obtaining GST registration is mandatory for businesses meeting certain turnover thresholds, and the GST certificate validates the business’s compliance with GST regulations.

Ensuring that these documents are in order and readily available can expedite the sole proprietorship registration process and help establish the business’s legal standing and credibility.

Requirements for Sole Proprietorship Firm Compliances

Compliance requirements for a sole proprietorship firm encompass various aspects of taxation and regulatory filings. Here are some key compliances that apply to a sole proprietorship:

  • Income Tax Return Filing:

    • The proprietor of the business is obligated to file a personal income tax return. This is typically done using either form ITR-3 or ITR-4, which allow for the declaration of business income.

  • Business Income Declaration:

    • Sole proprietorships can declare their business income only through forms ITR-3 or ITR-4. These forms are essential for complying with income tax regulations.

  • GST Return Filing:

    • If the proprietorship is registered under the Goods and Services Tax (GST) regime, it must file GST returns regularly. The frequency of filing depends on the business’s GST registration plan, with returns due monthly or quarterly.

  • TDS Returns:

    • If the proprietorship has employees or makes substantial payments for goods and services, it may be required to withhold tax at the source (TDS). Quarterly TDS returns must be filed to report and remit the tax withheld.

Additionally, depending on the nature of the business and its operations, there may be other compliance obligations to fulfill. These could include:

  • Industry-specific regulations
  • Licensing requirements
  • Local business permits
  • Any other applicable laws or regulations that govern the proprietorship’s activities

It’s crucial for sole proprietors to stay informed about their compliance responsibilities and fulfill them diligently to avoid penalties or legal consequences.

How Is a Sole Proprietorship Registration Process Handled by Vregister Startups?

At Vregister Startups, we streamline the procedure for registering your business as a sole proprietorship with a range of expert services:

  • Expert Consultation:

    • Our professionals provide expert guidance on various aspects of sole proprietorship registration, including service tax, sales tax, import/export code, and professional tax registration.

  • Vendor Coordination:

    • We facilitate connections with experienced vendors who handle the booking of your application and provide regular updates on its status and progress. Our network includes skilled professionals proficient in managing local registrations.

  • Timely Completion:

    • Our dedicated team ensures full support throughout the registration process, which typically takes between 5 to 15 business days, depending on the specific requirements and authorities involved.

How Can I Verify My Sole Proprietor Status?

To check the status of a sole proprietorship, follow these steps:

  • Visit the MCA Website:

    • Go to the Ministry of Corporate Affairs (MCA) website.

  • Navigate to the MCA Services Tab:

    • Find and click on the ‘MCA Services’ tab.

  • Select Company/LLP Master Data:

    • Under the ‘Master Data’ section, choose ‘Company/LLP Master Data’.

  • Enter Details:

    • Enter either the proprietorship’s Corporate Identification Number (CIN) or its name into the search bar.
    • Click on the ‘Search’ button.

  • View Registration Status:

    • The MCA website will display the registration status of the sole proprietorship, along with details such as the proprietor’s name, address, and registration date.

Note:

  • If you don’t have the proprietorship’s CIN, you can still search by its name. However, this may return multiple results with similar names. In such cases, consult the MCA or a GST practitioner to obtain the specific CIN for the proprietorship.

Possible Statuses You Might Encounter:

  • Active: The proprietorship is registered and operational.
  • Inactive: The proprietorship is registered but not currently operating.
  • Suspended: The registration of the proprietorship has been temporarily suspended by the MCA.
  • Cancelled: The registration of the proprietorship has been cancelled by the MCA.

Required Documents for Sole Proprietorship Registration

To initiate the registration process for a Sole Proprietorship, the following documents are necessary:

  • Address and Identity Proof:

    • Valid identification documents such as Aadhar card, Passport, or Voter ID.
    • Proof of address, which may include utility bills, rental agreement, or sale deed.

  • PAN Card and KYC Documents:

    • Permanent Account Number (PAN) card issued by the Income Tax Department.
    • Know Your Customer (KYC) documents, which typically include identity and address proof.

  • Rental Agreement or Sale Deed (for Shops & Establishment Act Registration):

    • In case of registration under the Shops & Establishment Act, a rental agreement or sale deed indicating the property’s ownership or tenancy arrangement is required.

For opening a current account, the following documents are typically needed:

  • Proof of Business Existence:

    • Documents establishing the existence of the business, such as registration certificates or licenses.

  • Shops & Establishments Act Registration:

    • Registration under the Shops & Establishments Act, which regulates the working conditions of employees in commercial establishments, is often required.

  • PAN Card:

    • The business’s PAN card issued by the Income Tax Department.

  • Address and Identity Proof:

    • Similar to the requirements for Sole Proprietorship registration, address and identity proofs of the proprietor may be necessary for opening a current account.

Compliances for Proprietorship

  • Income Tax:

    • Filing Requirement: Proprietors must file income tax returns annually if their income exceeds ₹2.5 lakhs (for individuals below 60 years) or ₹3 lakhs (for individuals above 60 years).

  • GST Registration:

    • Threshold: Proprietorships with turnovers exceeding ₹20 lakhs must register under GST.
    • Filing Requirements: Monthly and annual GST returns must be filed, and taxes collected on supplies must be remitted.

  • Shop and Establishment Act:

    • Registration: Required if the proprietorship employs staff.
    • Regulations: Governs aspects like working hours, wages, and leave.

  • Professional Tax:

    • Applicability: Certain professions (e.g., law, medicine, accountancy) require payment of professional tax.
    • Variation: Tax rates vary across states.

  • Trade License:

    • Requirement: Needed for proprietorships operating from physical premises.
    • Variation: Requirements vary by city.

  • Other Compliances:

    • Additional Regulations: May include environmental regulations, labour laws, and pollution control laws, depending on the business nature.

Summary:

A sole proprietorship offers simplicity, autonomy, and minimal regulatory burdens, making it ideal for small businesses with limited capital and liability concerns. It is crucial for proprietorships to stay informed and comply with applicable regulations to avoid penalties or legal issues.

Features Proprietership Partnership LLP Company

Defination

Unregistered entity
managed by a
single person

Formal Agreement between
two or more Parties to
manage a business

Hybrid entity with
features of
Partnership and
Company

Registered Entity
with Limited
Liability
to ownership
And ShareHolders

Ownership

Sole Ownership
Min 2 Partners Max 50 Partners
Designated Partners

Min 2 Directors
Min 2 sharehoders
(For Opc)
Registration Time
7-9 working Days

7-9 working Days

7-9 working Days

7-9 working Days
Promoter Liability
Unlimited Liability

Unlimited Liability
limited Liability
limited Liability
Documentation
MSME,GST Registration
Partnership Deed

LLP Deed,
incorporation certificate
MOA, AOA

Incorporation certificate
MOA, AOA
Governance
-

Under Partnership
Act
LLP Act(2008)

Under Companies Act 2013
Transferability
Non Transferable
Transferable if register under ROF

Transferable

Transferable

Compliance Requrements

Income Tax filing
if turnover
exceeds  ₹ 2.5 lakhs

ITR 5, Form 11, 
Form 8, ITR 5,
ITR 6, MCA filing,
Auditor's
Appointments
-
-

Dates of Registration for Sole Proprietors

Step Timeline Description
Business Name Selection
Initial step

Choose a unique name for your business.
Digital Signature Certificate (DSC)
Within a few days

Obtain a DSC, required for signing electronic documents and mandatory for ROC registration.

Document Preparation

1-2 days
Prepare necessary documents, including details about the proprietor and business. Requirements vary by state.

Submission to Registrar of Companies (ROC)

1-2 days
Submit prepared documents to the ROC for review and approval.

Trade License

1-2 weeks (varies by city)

Obtain a trade license from the local authority if operating from a physical location. Requirements differ based on city regulations.

Compliance

Ongoing
After registration, comply with laws and regulations such as income tax, GST, and the Shop and Establishment Act.

Why Choose V-register?

  • Choosing V-register for startups offers numerous advantages. With a simplified registration process, startups can easily navigate the legal requirements of registering their businesses. Expert guidance is provided every step of the way, ensuring clarity and compliance. 
  • V-register's cost-effective solutions cater to startups' budgets, providing comprehensive services from registration to compliance, including company formation, licensing, and tax registration. 
  • The reliable support offered addresses any queries promptly, while transparent pricing ensures no hidden fees. With a fast turnaround time, startups can swiftly establish their businesses and focus on growth with confidence in V-register's assistance.

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