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Proprietorship Registration is the simplest form of business registration and it involves fewer costs and compliances. The proprietor is the single owner of the whole business. An individual can start a business from home or any premises with a minimum amount of capital.
Control and management lie in the hands of a single person. There are many tax benefits available for the registered sole proprietorship business.
The profit and losses are borne by the sole owner because there is no distinction between the owner and the business.
The Proprietorship firm is an unregistered business where the owner of the business pays income tax on profits earned by the business. There is no specific registration required to start a sole proprietorship firm yet certain basic registrations are required to be obtained by a Sole Proprietorship firm. The following steps are discussed for registering a proprietorship firm:
Aadhar card is a mandatory requirement for the legal operations of any business in India. An Income tax return is filled only when the taxpayer has linked the Aadhar number with a PAN card with the help of the government website electronically.
The proprietor cannot file an IT return in the absence of a PAN card. There is a government portal where the proprietor can apply for PAN at a nominal fee. The documents required for PAN application include a photograph, ID proof and address proof. The online submission of the PAN application can be made after validating it through Aadhar e-KYC.
The proprietor must choose a name for the business. The name must be unique and must not infringe any registered trademark. It is recommended to register your unique name of the Proprietorship firm under the trademark Act, 1999 for protecting the business name from being copied by others.
The owner must collect the requisite documents for registration and decide on the registered office for setting up the business. A complete list of documents is discussed below.
After collecting the documents, the Proprietor can approach the bank for the opening of an account. The other documents could be electricity bills
The Shop and Establishment act license is legally compulsory to obtain as per the local laws. It has been issued on the basis of the business and its employees. All sole proprietors who own a shop or establish a commercial establishment must obtain the license.
After the GST registration, the proprietor needs to apply for a Udyam registration certificate. Through the registration of the business, the proprietor can avail of various benefits provided to Medium, Small and Medium Enterprises under the government schemes.
The sole owner should register for GST when the annual turnover exceeds the limit prescribed in the Act. If the business is carried out within the state and doesn’t cross the turnover limit, registration is not compulsory..
In case the sole owner is carrying on the business with food, he shall get a FSSAI Registration. One can obtain the sole Proprietorship registration online free when the business deals with Import or export, the owner must obtain the Import and export code..
The documents required for the registration of the proprietorship firm are given below:
The process of registration takes not exceeding 2 days. However, the time taken may depend on the nature of registration.
Goods and services tax is an indirect tax that replaced all the prevailing indirect taxes i.e., excise duty, service tax, etc. Sole proprietorship registration in India is not a complicated process and there is only certain registration that is necessary..
Every trader exceeding an amount of turnover needs to obtain GST registration. When the turnover exceeds Rs. 40 lakhs for trading business then GST registration is required for Sole proprietorship.
When the turnover exceeds Rs. 20 lakhs for a service entity, then GST registration is required for Sole proprietorship. The GST registration for proprietorship firms is required for eliminating the flowing effect of tax and improving efficiency.
The following are the documents required for registration under GST Act:
The process of GST registration for a sole proprietorship is given in the following steps:
Step 1: Visit the portal of GST by the government of India
Step 2: Click on registration and then a new registration
Step 3: Fill in all the details in the form and then click on submit
Step 4: A temporary registration no. is generated
In case a person has not filled out the complete application, then the TRN number is used to fill in all the details. The following details have to be submitted for proprietorship registration:
It is necessary to provide the trade name of the proprietorship firm with the tax jurisdiction
These include ID proof, address proof and a photograph.
The declaration by the Proprietor stating himself as an authorized signatory
The address must be provided with proof specifying whether self-owner or rented property.
Select the HSN or SAC code for the Goods and services respectively applicable to the business
Tick the verification box on the screen and then select the authorized signatory. Once the application is submitted, an Aadhaar authentication is required to submit the application and ARN will be generated. The GST registration certificate will be generated.
A Proprietorship registration is a business whose ownership and management are in hands of a single person. Some of the key features of a Proprietorship firm are as follows:
In legal words, the business and its owner are the same. He is solely responsible for bringing the capital required whether from private funds or by taking loans from the banks.
TThe proprietor is the sole beneficiary of profits and the sole bearer of any losses incurred. He enjoys all the profits from the business.
The sole proprietor is responsible for the management and control. He can employ a manager or other persons for this purpose.
TThe sole proprietorship registration is the sole bearer of all the losses and is personally responsible for the liabilities of the firm. The title of ownership and the business is not separated.
In case of any changes in the business, the sole proprietor doesn’t need anyone’s permission and he can make changes without delay. It has a minimum compliance requirement. There is no compulsory registration for the business.
The business has no life of its own. It is dependent on the owner because the owner and business are the same in the eyes of law. The registration process for Sole proprietorship is conducted on the official portal of the government
There are no special rules and regulations followed by sole proprietorship businesses. Therefore, it doesn’t need to be incorporated or compulsory registration.>
The benefits offered by a sole proprietorship firm are given below:
A person who is seeking to run his business as a sole proprietor doesn’t need to undergo any registration process. He only needs to secure a business-specific license to run the business legally.
It is a low-cost business idea; it is chosen by small businesses like retail shops and grocery retailers.
The sole owner of their business and uncompromised control over their profit.
The business doesn’t come under the ambit of any specific law.
In proprietorship registration, the tax authority doesn’t treat proprietors and businesses differently. It is a way to disclose profit and income tax returns.
The proprietorship business offers complete authority to the owner and to take any decision regarding business affairs without the intervention of anyone else.
The financial accounts of the proprietor are not mandatory for auditing requirements.
|Basis||LLP||Proprietorship||Private Limited Company||Partnership|
|Meaning||It is a form of partnership that has limited liability for each partner.||It is a business owned by a single person who is responsible for the management and personally liable for debts.||It is a privately held business by two or more individuals having limited liability.||A business held by two or more partners who share the profits and losses.|
|Registration Process||It is registered under the Limited Liability Partnership Act, 2008||There is no compulsory registration required for Proprietorship||The Pvt Ltd company is registered under the Companies Act, 2013.||Registration is voluntary and not compulsory and optional for partnership firms.|
|Name of the Entity||The name must be as per the naming guidelines by the MCA and end with the LLP words.||A sole proprietor can choose any name for the business.||The name should be as per the guidelines and end with the Private Limited Company.||Any name can be chosen by the partners for the partnership.|
|Legal Status of Entity||An LLP has a distinct identity from its partners.||A proprietor and a business are the same.||A Pvt Ltd company is a separate entity from its members.||A partnership does not have a separate status from its partners.|
|Minimum Number of Members||The minimum number of members is two for an LLP.||The sole owner is the only member in this business.||The Pvt Ltd company has minimum two members.||There must be at least partners coming together for partnership.|
|Maximum Number of Members||An LLP has a maximum of unlimited partners.||A proprietorship has a single person who is the owner.||A Pvt Ltd Company has a maximum of 200 members.||A partnership can have unlimited members.|
|Member(s) Liability||An LLP has limited liability for its partners.||A proprietorship has an unlimited liability of the sole owner.||A Pvt Ltd company has limited liability of its members.||A partnership has unlimited liability on their partners.|
|Existence or Survivability||The life of business for an LLP does not depend on its partners||A proprietorship depends on the sole proprietor.||A Pvt Ltd company has perpetual succession.||A partnership business is dependent on its partners.|
|Documents Needed for Registration||An identity and address proof of partners and registered office proof is required.||An Aadhar card is required for MSME registration.||An Identity proof with address proof and photos, DSC of directors and members are required.||An identity proof with PAN card copy is required in case of registration.|
|Annual Filings||An LLP has minimal compliances.||A proprietorship does not have compulsory registration and thus, no compliance.||A Pvt Ltd company has to submit the annual filing for every year with the Registrar.||A partnership is not required to file annual accounts.|
|Registration Cost||The cost of registration is government fees and professional charges.||There is no compulsory cost of registration as it is voluntary.||The cost are the incorporation cost and professional fees.||The cost of registration is voluntary.|
|Statutory Meetings||There is no requirement for annual general meetings.||There are no provisions for meetings.||A Pvt Ltd company must conduct an annual general meeting.||There are no provisions for conducting meetings.|
|Taxation||The tax rate of 30% is applicable.||The tax is levied on the total income of sole proprietor.||The tax rate of 30% is applicable.||The tax rate of 30% is applicable on partnership.|
|Transferability||The ownership is transferrable.||There is no transferability.||The articles restrict the transferability of shares.||There is no provision for transferability.|
|Foreign Ownership||The foreigners can invest in LLP with RBI approval.||The foreigners cannot start a proprietorship firm.||The foreigners can invest in Pvt Ltd company.||The foreigners are unable to start a partnership.|
In addition to registration or incorporation, a business may require other registrations depending on the business activity undertaken. Talk to an Advisor to find out registrations your business may require post registration.
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