Proprietorship

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Proprietorship

Service Includes

  1. GST registration
  2. Udyam registration

Market Price – Rs: 5,899 

OnlineTaxSeva Price- Rs: 2,599 (All Inslusive)

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Documents required For Proprietorship

PAN Card
Pancard of the Proprietorship
Aadhar Card

AadharCard of the Proprietorship

Details Of  Proprietorship Registration

A sole proprietorship is a type of business entity where a single individual owns and manages the entire business. In this business structure, the owner is personally liable for all the debts and obligations of the business. Sole proprietorships are easy to set up and operate, making them a popular choice for small businesses and startups. As a sole proprietorship, the owner has complete control over the business and is entitled to all the profits but also responsible for all the losses.

Advantages of Proprietorship:

  1. Easy to set up and operate: Proprietorships are easy to set up and operate as they have minimal legal formalities and regulatory requirements.

  2. Complete control: The proprietor has complete control over the business and can make all the decisions independently.

  3. Cost-effective: Proprietorships are cost-effective to set up and run, making them a good option for small businesses with limited resources.

  4. No sharing of profits: The proprietor is the only owner of the business and does not have to share the profits with anyone else.

  5. Tax benefits: Proprietorship firms can avail various tax benefits and deductions, including income tax and GST.

Disadvantages of Proprietorship:

  1. Unlimited liability: The proprietor is personally liable for all the debts and obligations of the firm, and his personal assets can be used to repay business debts in case of insolvency.

  2. Limited resources: Proprietorships have limited resources as the proprietor invests his own funds, and it may become difficult to raise external capital.

  3. Lack of continuity: Proprietorship firms have no perpetual existence and may come to an end in case of the proprietor’s death, illness or incapacity to run the business.

  4. Limited growth potential: Proprietorships may have limited growth potential as the proprietor has limited resources and expertise, and the business may not expand beyond a certain size.

  5. Difficulty in raising funds: Proprietorships may face difficulty in raising funds as they cannot issue shares or take on debt, and the proprietor’s personal creditworthiness may limit access to external financing.

Types of proprietorship

There are mainly four types of proprietorship in India:

  1. Sole Proprietorship – This is the simplest and most common type of proprietorship where a single individual owns and manages the entire business.

  2. One Person Company (OPC) – This type of proprietorship allows a single person to own and manage a company with limited liability.

  3. Registered Proprietorship – In this type of proprietorship, the business is registered with the government under the Shops and Establishments Act or the Micro, Small and Medium Enterprises Development Act.

  4. Unregistered Proprietorship – This is an informal type of proprietorship where the business is not registered with the government and the proprietor has unlimited liability for all the debts and obligations of the business.

Documents required for proprietorship registration:

The documents required for proprietorship registration in India may vary depending on the state in which the business is being registered. However, some of the commonly required documents are:

  1. PAN card of the proprietor
  2. Identity proof of the proprietor (Aadhaar card, Voter ID, Passport, Driving License, etc.)
  3. Address proof of the proprietor (Aadhaar card, Voter ID, Passport, Driving License, etc.)
  4. Business name registration certificate (if any)
  5. Business address proof (Electricity bill, Water bill, Property tax receipt, Rent agreement, etc.)
  6. Bank account statement or cancelled cheque
  7. Digital Signature Certificate (DSC) of the proprietor (optional)
  8. NOC from the landlord (if the business premise is rented)
  9. GST registration certificate (if applicable)
  10. Professional tax registration certificate (if applicable)
  11. Trade license (if applicable)

Taxation and compliance requirements for a proprietorship in India are as follows:

  1. Income Tax: Proprietorships are not considered as separate legal entities and hence, the income earned by the proprietor is taxable in their hands. The proprietorship is required to file income tax returns every year, and pay taxes as per the slab rates applicable to individuals.

  2. Goods and Services Tax (GST): If the annual turnover of a proprietorship exceeds Rs. 20 lakhs, or if the business is involved in interstate transactions, it is mandatory to obtain GST registration. The proprietorship is required to file GST returns every month or quarter, as per the turnover.

  3. Professional Tax: Professional tax is a state-level tax that is applicable to proprietors who are engaged in professions such as doctors, lawyers, engineers, etc. The proprietorship is required to obtain a professional tax registration and pay the tax as per the slab rates applicable in their state.

  4. Shop and Establishment Act: The proprietorship is required to obtain a Shop and Establishment registration from the local municipal corporation or Panchayat. The registration is necessary for carrying out commercial activities, and it ensures compliance with rules related to working hours, weekly offs, leave policies, etc.

  5. Other Compliance Requirements: Proprietorships are also required to comply with other legal requirements such as obtaining a PAN card, maintaining proper accounting records, adhering to labour laws, filing annual returns with the Registrar of Companies (ROC) in case of certain types of businesses, etc.

Liability of the proprietor and the legal aspects of a proprietorship.
 

In a proprietorship, the proprietor is personally liable for all the debts and losses incurred by the business. This means that the proprietor’s personal assets can be seized to settle any business debts or legal claims.

Additionally, there are certain legal aspects that proprietors should be aware of, such as:

  1. Business registration: The proprietorship should be registered with the relevant authorities, such as the Registrar of Firms, if required by the state laws.

  2. Taxes: The proprietor is required to file income tax returns and pay income tax on the profits earned by the business. If the business is registered under GST, the proprietor must also comply with GST regulations and file regular returns.

  3. Contracts: Any contracts or agreements entered into by the proprietorship should clearly state that the business is a sole proprietorship and that the proprietor is personally liable for all debts and obligations.

  4. Trademarks: If the proprietorship uses a unique business name or logo, it is recommended to register a trademark to protect the intellectual property of the business.

  5. Employment laws: If the proprietorship hires employees, it must comply with relevant employment laws, such as minimum wage, working hours, and employee benefits.

  6. Regulatory compliance: Depending on the nature of the business, there may be other regulatory compliance requirements, such as obtaining permits and licenses from local authorities, complying with health and safety regulations, etc.

Opening Bank Account and PAN Card:

To open a bank account in the name of a proprietorship, the following documents are typically required:

  1. PAN card of the proprietor
  2. Address proof of the proprietor
  3. Proof of business registration (if registered)
  4. Business address proof
  5. Letter of authorization in favor of the person who will operate the account on behalf of the proprietorship

Once the bank account is opened, the proprietor can obtain a PAN card in the name of the proprietorship by submitting a copy of the bank account opening form, along with the PAN card of the proprietor, to the income tax department. The income tax department will issue a new PAN card in the name of the proprietorship

Proprietorship Registration FAQ’s

What does the term “proprietorship firm” mean?

 A proprietorship firm is a business structure where a single individual owns and manages the entire business, and is personally responsible for all the debts and obligations of the firm. It is a popular choice for small businesses and startups in India due to its ease of setup and operation.

What are the different types of proprietorship? 

There are four main types of proprietorship in India: Sole Proprietorship, One Person Company (OPC), Registered Proprietorship, and Unregistered Proprietorship. The choice of business structure depends on the proprietor’s needs, goals, and resources.

What is the distinction between proprietorship and firm?

Proprietorship and firm are similar terms, but with a subtle difference. Proprietorship refers to a business structure where a single individual owns and manages the entire business, while a firm refers to a group of individuals who come together to carry out a business activity. In a firm, ownership is shared among partners, and profits and losses are also shared among them. In proprietorship, the proprietor has complete control over the business, and all the profits and losses belong to the proprietor.

Is there a certificate of incorporation for a proprietorship?

No, a certificate of incorporation is not provided for proprietorship.

Are there any compliance requirements for a sole proprietorship?

As a sole proprietorship and the proprietor are the same, the individual only needs to file Income-tax and GST returns for the business.

Is there a minimum requirement to start a sole proprietorship?

No, there is no minimum requirement to start a sole proprietorship in India.

How long does a sole proprietorship last?

A sole proprietorship exists as long as the proprietor is alive and desires to run the business.

Is the owner of a sole proprietorship the same as the sole proprietor?

Yes, the owner of a sole proprietorship is the same as the sole proprietor.

What licenses are required for proprietorship registration?

The licenses required for proprietorship registration vary from state to state. In Maharashtra, a Shop and Act license is needed, and in West Bengal, a trade license is required.

What is the role of the proprietor in a sole proprietorship?

The proprietor owns, controls, and manages the sole proprietorship, and has complete authority over it.

Is it possible to obtain a separate PAN card for a sole proprietorship?

No, it is not possible to obtain a separate PAN card for a sole proprietorship. The proprietor’s PAN card will be used for all official purposes related to the business.