A sole proprietorship is the most typical type of a enterprise entity the place one particular person is the proprietor and is personally chargeable for all of the money owed and liabilities of the enterprise. It’s the simplest type of an entity with minimal compliance procedures.
Sole Proprietorship Registration will be carried out in 3 methods:
- Register underneath the Store and Institution Act.
- Get a Udyog Aadhaar underneath the Ministry of MSME.
- Get a GST registration.
1. Sole Proprietorship registration underneath Store and Institution Act
A sole proprietor can register his enterprise underneath the Store and Institution Act, if he has a store as a workplace.
Right here, store means any premises:
- a spot the place items are offered, both by retail, wholesale, or
- a spot from the place companies are supplied to clients.
- It consists of an workplace, a store-room, godown, warehouse or work place, whether or not in the identical premises or in any other case, which is utilized in reference to such commerce/ enterprise.
It doesn’t embody a manufacturing facility, a business institution, residential lodge, restaurant, consuming home, theater or different place of public amusement or leisure;
In case you have a store as per the definition given above, then you’ll be able to register your sole proprietorship enterprise underneath the Store and Institution Act by making an utility to the native Municipal Company of your metropolis.
Sole Proprietorship Registration Course of underneath Store and Institution Act
You may register your sole proprietorship underneath the Store and institution Act by following the method given right here.
2. Sole Proprietorship Registration by means of Udyog Aadhaar underneath Ministry of MSME
An Udyog Aadhaar is a novel identification quantity supplied by the Ministry of MSME to the enterprise homeowners. Together with all different entities equivalent to firm and partnership, even a sole proprietor can apply for udyog aadhaar.
Aside from getting eligible to avail the advantages supplied by the Ministry of MSME, a sole proprietor has an added benefit of getting a novel id for his enterprise which can be thought of as Sole Proprietorship Registration.
Udyog Aadhaar is a brand new technique of registration underneath Ministry of MSME. It has changed the previous technique of registration, the place kind EM-I and EM-II had been used to register. Now, by making use of for Udyog Aadhar any enterprise can register itself to avail the advantages of the varied schemes launched by the Ministry of MSME.
To know extra particulars about Udyog Aadhaar and the method of making use of for a similar, you’ll be able to refer this text on Udyog Aadhaar Registration.
3. Sole Proprietorship Registration by means of GST Registration
GST registration is one other method of getting your sole proprietorship registered. You may apply for GST registration if you’re dealing in any sort of alternate of products and companies. It has changed the previous VAT and Service tax registration.
GST registration is a superb technique of getting an id to your sole proprietorship concern. Nevertheless, there are specific essential concerns that should be evaluated earlier than opting this technique.
Underneath GST registration, the one downside is that after registration it’s obligatory to satisfy all of the compliances. Each registered enterprise has to compulsorily acquire the tax from the purchasers and file the GST returns.
If a sole proprietor has a turnover of lower than Rs. 20 Lakhs, it’s not obligatory for him to get registered and acquire GST. But when he nonetheless chooses to register in an effort to register his sole proprietorship then he must undergo pointless added compliances which he may have averted.
GST Registration Course of for Sole Proprietorship Registration(Step-by-step information)
To know concerning the registration course of and different particulars with respect to GST registration, please refer right here.
Which of the above 3 methods of Sole Proprietorship Registration is one of the best?
After evaluating all of the three choices, in our opinion if you’re a sole proprietor who has a enterprise with a turnover of extra that Rs. 20 Lakhs, then it’s best to go for the GST registration to get a enterprise id, as it’s the most generally accepted type of id for sole proprietorship concern.
Nevertheless, in case your turnover is lower than 20 lakhs then GST registration might not be very useful for you as there are a number of returns to be filed after acquiring a GST Quantity.
If getting a enterprise id is your fundamental concern. You may go for Registration underneath Store and Institution Act, or apply for Udyog Aadhaar.
Opening a Financial institution Account within the title of your Sole Proprietorship
Most banks have their very own standards for opening of a checking account.
Though all of the above 3 methods of registering a sole proprietorship are legally legitimate, some banks nonetheless dont settle for Udyog Aadhaar or Registration underneath the Store and Institution Act.
Banks insist on a GST Registration. If the GST Registration will not be there, some banks are prepared to just accept the Revenue Tax Return as a proof of registration supplied your Commerce Title is talked about in your earlier yr’s ITR.
Some banks don’t settle for Udyog Aadhaar or the Registration underneath the Store and Institution Act and due to this fact, it’s advisable that in case your sole function of registering is to open a checking account in your title, it’s best to first examine along with your banker on what are the paperwork which they want.
Is Sole Proprietorship Registration obligatory?
No, Sole Proprietorship Registration will not be obligatory. It’s optionally available on whether or not an individual intends to register his sole proprietorship or not.
Though, banks insist on getting sole proprietorship registered if you happen to intent to open a checking account within the title of your corporation, however as per legislation – it’s not obligatory.
Even if you happen to register your sole proprietorship, the government won’t subject a brand new PAN Card for a similar. The identical PAN Card of the proprietor would proceed to be relevant for the only real proprietorship as nicely.
Advantages of choosing a Sole Proprietorship
Sole Proprietorship is the most typical type of enterprise entity. The small enterprise homeowners often begin their companies as Sole Proprietorship solely. The good thing about sole proprietorship will be labeled underneath two classes:
- Entity sort advantages
- Registration advantages
These advantages can be found regardless of whether or not you register your sole proprietorship or not. In different phrases, sole proprietors who haven’t registered their agency and are carrying on enterprise on their very own title are additionally eligible for these advantages.
Sole Proprietorship Entity Advantages
There are numerous advantages of beginning your corporation as a proprietorship concern, a few of that are listed under,
- Much less Compliances
- Straightforward to begin
- Value Environment friendly
- Enterprise Title
- Absolute Management
- Straightforward to shut
Much less Compliance
A sole proprietorship concern doesn’t must file any separate tax returns for the enterprise even whether it is registered underneath any Act. The only real proprietor solely has to file his personal particular person tax return and in that disclose the main points associated to his enterprise revenue/loss. In different circumstances, like partnership and firm, the entities must file a separate return for the enterprise.
Nevertheless, if the only real proprietor has registered underneath GST then has to file the returns for GST compliances. However for Revenue tax functions no separate return submitting is required.
Straightforward to begin
There isn’t a obligatory registration required to begin a sole proprietorship. One can begin a enterprise on his personal underneath any title as a sole proprietorship concern.
Value Environment friendly
The price of beginning a enterprise as sole proprietorship is sort of nil. The one expense which may be required is to acquire a license for the enterprise, if required. Additionally, because the compliance necessities are minimal, even that price is saved.
A sole proprietor can begin a enterprise underneath any title so long as it’s not infringing any trademark. The only real proprietor can initially begin the enterprise underneath a novel title after which when he thinks he has made a goodwill, he can get a registered trademark for his title.
Nevertheless a enterprise title will not be a Model Title and anybody can use it. If you wish to register a model title then it’s important to register your trademark. Sole Proprietorship registration will not be Model Title registration.
In a sole proprietorship there is just one proprietor and therefore the management of the enterprise is at all times with the proprietor. In all different entities there’s a minimal requirement of no less than two individuals to begin the enterprise, equivalent to Partnership, Personal Firm and so forth.
Since in a sole proprietorship concern, the enterprise and the proprietor are thought of as one and never a separate entity, there isn’t a particular winding up course of as within the case of different entities. The winding up of the enterprise is straightforward and the one requirement is cancellation of tax registrations, if any, equivalent to GST registration.
Sole Proprietorship Registration Advantages
Registering a sole proprietorship has two main advantages:
- Enterprise Id–
A separate id of the enterprise which is accessible within the case of different entities equivalent to Partnership and Firm.
- Ease in opening the checking account within the title of enterprise–
The main concern in case of a sole proprietorship is getting a checking account within the title of the enterprise. Since a sole proprietorship doesn’t have a Authorities id it turns into tough to show the existence of a enterprise. After registration it turns into simpler to open a checking account for a sole proprietorship because it will get a sound Authorities id.
Disadvantages of a sole proprietorship concern
The largest drawback of a sole proprietorship is limitless legal responsibility.
A sole proprietorship doesn’t have any governing legislation to guard the rights of a sole proprietor. The proprietor is personally chargeable for all of the money owed and liabilities of the enterprise. If the enterprise doesn’t have sufficient property to repay the money owed and liabilities then the proprietor will likely be personally chargeable for it. His private will be taken to settle the exterior claims.
Tax on Sole Proprietorship
A sole proprietorship will not be thought of as a separate id which is completely different from its proprietor. Due to this fact, the tax of the proprietorship enterprise is assessed within the palms of the proprietor solely as per the Revenue Tax Slabs. Which means that the revenue earned by means of the enterprise won’t be taxed individually as in case of partnership or firm. However it will likely be taxed as an revenue of the proprietor.