FAQ of Proprietorship Formation

0
Reading Time: 2 minutes| (Last Updated On: February 24, 2018)

FAQ of Proprietorship Formation

FAQ of Proprietorship Formation

Q1. What is a sole proprietorship?
Answer:- A sole proprietorship is the simplest form of business, which you will find all over world. It’s like you woke up today and wants, and you purchase goods from a wholesaler and start selling them instantly. You have created a proprietorship, No registration is needed. In case you need to open a bank account approach your nearest bank account and open a current account with them.

Q2. How are sole proprietorships treated for tax purposes?
Answer:- As there is no difference between the business and its owner in case of proprietorship, Unlike corporations, sole proprietorships are not treated separately for the income tax purposes. This means that any profit derived from your sole proprietorship is treated as your personal income and is accounted for on your individual tax return. Any such income is taxed to you in the year it was received or accrued to you. The business income shall be shown as separate income in the income tax return of the proprietor.

Q3. How to Establish a Sole Proprietorship business?
Answer:- Yes. A partnership firm can sue or be sued in it’s own name. The firm is treated separate from its partners. However the partners do not enjoy limited liability as available in case of LLP or a company. In a situation where the firm is not in a position to discharge its liabilities the partners shall be called in to pay the liabilities of the firm.

Q4. Is it difficult to open a Bank Account for proprietorship?
Answer:- Opening current account in the name of the owner of the proprietorship firm is very easy; all they need is know your customer (KYC) Documents of the proprietor. However if the bank account is to be opened in the name of the proprietorship then bank need two entity proof in the name of the firm. Setindiabiz Specialist shall be able to assist you for opening the account.common-question-bottom.

Q5. Am I personally liable for my business under a sole proprietorship?
Answer:- Yes. Unlike other incorporated business forms, you are personally liable for any of your sole proprietorship’s debts or legal judgments against your business. This means that in order to satisfy debts owed by your business, debt collectors can come after your personal assets, homes, cars, etc. For this reason alone, you should be extremely cautious about setting up a sole proprietorship. Setindiabiz.com recommends One Person Company in place of proprietorship.

Q6. Do I need an attorney to help me start a sole proprietorship?
Answer:- Strongly recommended to have an consultation with our startup specialists, which is free and is available without any obligation as such to take our services. As every business is unique and there may be circumstances where a partnership, Limited Liability Partnership (LLP), Private Limited Company or some other kind of business structure is a better fit. You also may want to get more insight into the specific liabilities your sole proprietorship may face.common-question-bottom
More Details

Share.

About Author

Team SETINDIABIZ, is a vibrant, updated and experienced people with professional qualifications such as CA, CS, CMA & Advocates. With our presence all over India, we are in a better situation to serve entrepreneurs in securing 100% compliance, all the time.

Leave A Reply