Incorporations

Sole Proprietorship

Sole Proprietorship, at an all-inclusive price, with Udyam (MSME) and GST Registration (optional).

Complete by* : 07 May, 2024

Pricing Summary

Traditional CA/CS Price : ₹ 5,000 /-

Other Online Price : ₹ 3,500 /-

Our Base Price : ₹2,288 /-

Govt. fees & taxes : ₹412 /-

You Pay: 2,700/- all inclusive

Government Fee included in above

You Save : ₹800/- to- 2,300 /-

What do you get?

15 Mins free Consultation with an EXPERT

GST Registration (optional)

eTAN

Udyam (MSME) Registration #

# service available only if eligible for MSME registration

Why Should You Choose SeedUp for

Registering your Sole Proprietorship?

SAVINGS

in cost, most economical

FASTEST

completion of assignment

ADHERENCE

to compliances, giving you all that matters

RESPONSIBLE

towards your specific requirements

HASSLE FREE

we only ask for required documents

 

What is Sole Proprietorship?

 

A business activity carried out by an individual is called sole proprietorship and the person is called the proprietor. The identity of an individual and the business are not different from each other. Proprietorship is the most common type of business in India and it is used by most micro and small businesses operating in the unorganized sectors.

Proprietorships are simple to start and have minimal regulatory compliance requirements for operating. Although there is no specific Act to regulate this organization, there are many ways to register a Sole Proprietorship firm.

For a Sole Proprietorship business, registration is not required as it is identified through alternate registrations, such as GST registration and trade license registration. However, its liability is unlimited and it also doesn’t have perpetual existence.

 

 

Documents Required

PAN Card

Utility Bill (Telephone, Electricity)

Aadhaar Card

Rental agreement details, if any

Passport Size Photo

* (All documents in Pdf scanned. Image file in jpeg format)

* (All documents to be Self Attested and signed on each page)

Incorporation

Sole Proprietorship

Minimal documentation, immediate start of business, cost effective

Steps for Incorporation

Collect information and documents

Apply for eTAN

MSME Registration #

GST Registration (optional)

# service available only if eligible for MSME registration

Advantages and Disadvantages of

Sole Proprietorship

As the name suggests, ‘sole’ means ‘only one’ and ‘proprietorship’ implies ‘ownership’. Hence, a sole proprietorship is a form of business organisation, wherein a single person owns, manages and controls, all the business activities and the individual who operates the business is called as a sole proprietor or, a sole trader.In this business unit, the sole proprietor is exclusively responsible for employing capital to commence business, bearing all the risk of the enterprise and also for managing all the activities singlehandedly. And to do so, he/she pools and arranges various resources in an organised way, with the sole aim of earning profit. The owner is exclusively responsible for all the decisions. All the profits earned by the business goes to the sole trader’s pocket, and he is solely responsible for the loss suffered.

Advantage

One can establish a sole proprietorship instantly, easily and inexpensively. The proprietor will have complete control of the entire business. It facilitates quick decision making and freedom to do business. The proprietor is not answerable to anyone and is responsible for his own deeds.

Advantage

The business owner derives the maximum incentive from the business as he does not have to share any of his profits. Law does not require a proprietorship to publish its financial accounts or any such documents to any members of the public.

Disadvantage

It has limited resources. He may face difficulty in raising capital for expansion etc The proprietor has to perform all the managerial functions like sales, purchase, marketing, selling, dealings with clients, etc. He may not be able to employ and retain aspiring employees.

Disadvantage

If the proprietor fails to pay the debts he will be personally liable. His personal assets too can be attached to pay off the debts. This form of business does not enjoy perpetual succession or separate legal entities. Thus, with the death of the proprietor, the business, too, has to end.

Sole Proprietorship vis a vis other business structures

Parameter

Sole Proprietorship

Partnership

One Person Company (OPC)

Limited Liability Partnership (LLP)

Private Limited Company

Statute

Common Law

Common Law – unregistered

Indian Partnership Act, 1932- registered

Companies Act, 2013

Limited Liability Partnership Act, 2008

Companies Act, 2013

Ownership

The Proprietor- an individual

Minimum 2 partners ( a company can be a partner)

Division of Labour-

O/ship- Promoter (only one)

Daily working- Board of Director(s) (OPC may have more than 1 director)

Division of Labour-

O/ship- All partners

Daily working- Designated Partners

Division of Labour-

O/ship- Promoters and shareholders

Daily working- Board of Directors (at least 2 directors)

Legal identity & Liability

No distinct PAN.

No separate legal entity. Proprietor to bear all liabilities.

 

Distinct PAN.

No separate legal entity from its partners. Private assets of the partners can be used to meet the liabilities of the firm in case firm's assets are not adequate to meet its liabilities.

Distinct PAN

Separate legal entity

Limited Liability. Personal property does not get attached

 

Distinct PAN

Separate legal entity

Limited Liability. Personal property does not get attached

 

Distinct PAN

Separate legal entity

Limited Liability. Personal property does not get attached

 

Funding

Owned funds. Difficult for bank loans. Collateral of personal assets.

Owned funds. Difficult for bank loans. Collateral of personal assets.

Owned funds or debt. Cannot raise or offer equity

Owned funds. Debt funds can be managed.

For startups, Investors do not like to invest in this type of business entity

Best option if looking for business expansion I long run. Both Debt and Equity permitted. 

Costs:

  

Incorporation

NIL

Very minimal.

If registered, then cost for registration. May go upto 10000/-

Presently greatly reduced. CG charges- NIL upto 15 Lakhs

Stamp Duty payable to State Governments ranging from 200/- to 10000/-

Very minimal.

Presently greatly reduced. CG charges- NIL upto 15 Lakhs

Stamp Duty payable to State Governments ranging from 200/- to 10000/-

Recurring

Trade license

Trade License

Tax Audit depending on Turnover

Filing of Forms

Auditor Fees

ITR filing fees

Other business registrations

Filing of Forms

Auditor Fees- if Turnover exceeds 40 Lakhs

ITR filing fees

Filing of Forms

Auditor Fees

ITR filing fees

Other business registrations

Taxation

Depends on personal tax slabs

Taxed at 30%. Remuneration

paid to partners can be

claimed as deduction,

restricted to the limits

speci‑ed (under the IT Act).

MAT does not apply.

No general advantages

(industry specific advantages are available). Tax to be paid at flat rate of 30% on profits, Dividend taxable in hand of receiver.

Minimum

Alternate Tax (MAT) applicable

No general advantages

(industry specific advantages are available). Tax to be paid at flat rate of 30% on profits. MAT is applicable.

Taxes on Income The following rates are applicable to the domestic companies for AY 2020-21 based on their turnover (excluding cess & surcharge): 

 

Sections

Tax rate

Surcharge

Section 115BA (Applicable Manufacturing Domestic Companies

25%

7%/12%*

Section 115BAA (applicable domestic companies)

22%

10%

Section 115BAB (manufacturing)

15%

10%

Any other case

30%

7%/12%*

Dividend taxable in hand of receiver. Minimum

Alternate Tax (MAT) applicable

Going Concern

Not survive if proprietor departs

Departure of any partner brings it to an end

Nominee is mandatory to be appointed. It will continue

It will continue even if a partner departs

It will continue as it has perpetual succession.

Registration

 

There is no procedure to register a Sole Proprietorship. Its existence is established by opening a Bank account in the name of the Proprietorship and other registrations like Trade Licence, GST, MSME etc that will be required to conduct business. Further there is no legal body/regulation that issues Certificates for registering the name of a Proprietorship. Therefore, such firms can adopt any name that is not infringing on an already Registered Trademarks. Further, the owner of the Proprietorship may ensure the exclusivity of their business name by registering their name & style as a Trademark.

FAQs

What are the requirements to be a Proprietor?

The proprietor must be an Indian citizen and resident. Non-resident Indians and persons of Indian origin can only invest in a proprietorship with prior approval from the Government of India. 

 

Is there any Minimum Investment?

There is no minimum investment required as capital to start a Proprietorship. 

 

Does Proprietorship have a Separate legal existence? 

No, the proprietorship firm and the proprietor are one and the same legally. The PAN of the proprietor will be the PAN of the firm. Therefore, there will be no separate legal identity for the business. The assets and liabilities of the business and the proprietor will also be one and the same. 

 

Who makes the Investment?

The investment is made by the proprietor who is the sole owner. Outsiders cannot invest in Sole proprietorship business since they will not have any control over their investment nor a share in its profits.. They can advance a Loan and earn interest income. 

 

What are the compliance requirements? 

Proprietorships will have to file their annual tax return with the Income Tax department. 

 

Can there be a transfer of business? 

The business can be transferred or sold to another person or entity after valuation. The assets of the proprietorship business can be transferred by sale to another person. The licenses etc have to be suitably modified, in some cases amended or fresh applications may be required.

 

Can Proprietorship be converted into another form of entity?

Yes, the proprietorship can be converted into a Limited Liability partnership (LLP) or a One Person Company (OPC) or a Limited Company.

Key Registrations

Proprietorship business differs in terms of the functions, clientele and the mode of operations. These are some of the registrations that should be availed of by a sole proprietorship concern.

 

MSME Registration 

To register Sole Proprietorship under Micro, Small and Medium Enterprise

 

TAN Registration

For salary payments wherein TDS deduction is required. 

 

GST Registration 

Required if the business crosses the threshold limit (20 lakhs/40 lakhs)

 

IEC Code 

If import and export of goods are undertaken  

 

FSSAI Registration 

If the business is dealing in selling or handling of food products

 

Documents Required

Mandatory documents 

The following documents are required to get licenses from Government authorities- 

● Aadhaar card 

● PAN card 

● Utility Bills ( electricity Bills/ Telephone Bills) 

● Place of Work address (Rent/Lease Agreement or Sale Deed)

 

Any two of the below mentioned documents 

A. Documents for establishing proof of entity: 

● Utility bill (Electricity, fixed landline, Water bill) in the name of the firm 

● Inspection / Verification certificates issued under Weights & Measures Act, 1976 

● Permission Issued by respective government authority for units in SEZ, STP, EOU, EHTP, DTA and EPZ in the name of the entity mentioning the address allotted 

● Complete Income Tax return(ITR 4) duly acknowledged by Income Tax authorities . The name of the firm would appear on 2nd page of ITR 4 

● Registration certificate/license issued by Municipal authorities such as Shop & Establishment Certificate/Trade License 

● GST Certificate or Letter Of Registration for GST 

● Certificate/Registration document issued by Professional Tax authorities 

● Valid Business License or Certificate Of Registration issued by State/Central Government authority (validity would include the grace period for renewal as mentioned in the certificate)

● RBI/SEBI Registration Certificate 

● License issued by Food and Drug Control Authorities 

● Import - Export certificate (IEC Code) issued by the Director General of Foreign Trade 

● TAN allotment letter issued in the name of the firm

 

Any two of the below mentioned documents

B. Documents for establishing address of the firm: 

● Lease/ Leave & license agreement / Rent agreement copy duly stamped alongwith the utility bill in the name of the landlord 

● PAN intimation letter issued by IT authority. It must bear name and address of the entity / proprietor. 

● Landline telephone bill/electricity bill of public & approved private operators in the state. (Bills not to be older than 2 months from the date of account opening) 

● Property Ownership Deed i.e. title deeds of the property in the name of the firm duly stamped and registered 

● TAN Allotment Letter issued in the name of the firm 

● Latest property tax or water tax paid receipt/bill raised in the name of the firm 

● Existing bank account statement or passbook of a PSU/private sector/foreign bank. Statement not older than 4 months from the date of account opening to be accepted 

 

Any one of the below mentioned documents 

C. Documents for establishing proof of identity of the Proprietor: 

● Valid Passport 

● PAN card 

● E-Aadhaar letter downloaded from UIDAI site/Aadhaar card issued by government of India. 

● Valid Permanent Driving license 

● Election Card / Voter ID card 

● Job card issued by NREGA duly signed by an officer of the State Government 

● Identity card issued by Central/State Government, Public sector undertaking, any Scheduled Commercial Bank or any Public Financial Institution for their employees is also acceptable Valid Photo Credit Card