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Sole Proprietorship Registration in India

Starting a Proprietorship Firm is easy, simple and cost-effective. We offer free consultation, GST Registration, and Udyam Enrolment (MSME) in our packages to set up a proprietorship firm. Talk to our start-up advisors today.
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Proprietorship is the simplest form of business that does not require any registration. However to open bank Account and do business as proprietorship two registrations are required.

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Important Points

  • Suitable For Small Business
  • NRI/PIO Can Start A Proprietorship Firm on Non-Repatriation Basis.
  • Foreigners & Non-Citizens Are Not Allowed To Form A Proprietorship.

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What is a Sole Proprietorship?

A Sole Proprietorship is a single owner business where the sole owner is entitled to all its capital, profits, and liabilities. The responsibilities of the sole owner extends to controlling the management of the firm as well. There is no formal requirement of incorporating a Sole Proprietorship as it is not regulated under any statute. So, it is obvious that it does not have a legal identity of its own.
How does a Sole Proprietorship operate then? Well, a Sole Proprietorship operates with the identity of its owner or proprietor. All business related transactions are conducted from the current bank account opened in the name of the proprietor itself. This implies that in a Sole Proprietorship the identity of the business and its owner are one and the same. It is for this reason that it cannot exist or be continued beyond the life of the Proprietor.

Key Features of Sole Proprietorship

  • Single Owner
  • Full Control Over Managemen
  • Entitlement to 100% Profits
  • Unrestricted Liability
  • Limited Existence
  • Operates on the Owner’s Identity
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Checklist & Documents

Sole Proprietorships are unregistered entities, which means that there is no requirement to formally incorporate them. However, their legal existence can be established by other tax and regulatory registrations which are mandatory. These include the MSME Registration, GST Registration, Shops Act Registration and opening a business bank account. Given below is a table that contains two lists. The first list informs abouts the minimum requirements to set up a Sole Proprietorship. The second list contains Proprietorship Firm Registration documents. Refer to these lists to successfully establish your Proprietorship business anywhere in India!
Minimum Requirements List of Documents
  • Single Owner (NRIs require prior Government Approval)
  • A Unique & Valid Name
  • A Registered Office Address
  • Adequate Capital
    Documents of the Proprietor
  1. PAN Card
  2. Aadhar Card
  3. Two Coloured Photograph
  4. Address Proof
  5. Cancelled Cheque for Bank Details
    Documents of Registered Office
  1. Proof of Address of Registered Office
  2. NOC from the Owner of the Office Space
  3. Rent Agreement, if applicable
Note:
  1. Address Proof of the Proprietor must not be older than two months.
  2. Rent Agreement must be stamped by a Public Notary. Stamp Duty and Notary Charges applicable in the respective state must be paid accordingly.

Sole Proprietorship Registration Process in India

The Proprietorship Registration process in India is the easiest and simplest among all business structures. There is no requirement of a formal incorporation. You can straightaway start your business activities after you have fulfilled all minimum requirements mentioned above. However, after starting business operations, you must take certain mandatory registrations to establish your firm’s legal existence. Navigate through the steps below to complete the Sole Proprietorship Registration process in India.

Step-1: Documentation

The process of Sole Proprietorship Registration in India starts by preparing all the Proprietorship Registration documents. These documents include the KYC documents of the proprietor, and the proof of registered office address. Also an NOC from the owner of the office premises is required. A complete list of these documents have been listed above. Make sure they are accurate and contain the updated information.

Step-2: Select a Unique Name for Business

The next step is to select a unique name for your Sole Proprietorship Firm. The name must be legally valid, and available for use. It must not be used by any other registered business. Also, the selected name must not infringe the intellectual property rights of a registered trademark user. Make sure that after selecting the name of your proprietorship business, you register it as a trademark. This prevents its misuse and plagiarism by other entities.

Step-3: Take online MSME / Udyam Registration

Sole Proprietorships are usually small-scale local businesses that qualify as MSMEs. You can obtain the MSME registration for your proprietorship business and avail numerous benefits. These include collateral-free loans, interest subvention on loans, timely payments by buyers, and 50% rebates on IPR registration. Moreover MSME registration Certificate will be crucial for opening a business bank account. We provide MSME Registration to Proprietorship Firms throughout India.

Step-4: Proprietorship GST Registration

Eligible Sole Proprietorship Firms must get GST registration for fulfilling all GST-related compliances. The applicant firm can submit the application and all GST registration documents required for a Proprietorship firm on the GST portal. As soon as the application is approved by the GST department, a GSTIN is allotted to the firm. This GSTIN can be used for all future GST-related activities.

Step-5: Get Shops & Establishment Act Registration

Except manufacturing businesses, all businesses are mandatorily required to get the Shops & Establishment Registration. This includes Sole Proprietorship firms as well. The registration is obtained from the State’s Labour Department for which either an online or offline application is filed. The application must be accompanied by all the documents listed above.

Step-6: Industry-specific Registrations

Based on the nature of business activity and the registered office location of the Proprietorship, certain licenses must be mandatorily obtained. For instance, IEC Code is required if the Proprietorship business conducts import / export activities. Another example would be a FSSAI license required if the business is dealing in food related activities.

Benefits of Proprietorship Firm Registration Online

Sole Proprietorship registration online is way easier and simpler when compared to other business structures in India. Above the simplicity of formation, there are several key benefits that a Proprietorship Firm offers. The table below mentions all these benefits in detail for your clear and comprehensive understanding.

Easy to Establish

Proprietorship can be formed with basic legal documents. There is no need for incorporation.

Easy to operate

A Proprietorship does not have a distinct legal identity and is operated with the identity of proprietor.

Lesser compliances

A Sole Proprietorship fulfills negligible tax compliances like filing income tax and GST returns.

Privacy Intact

Since Sole Proprietorship is unregistered, none of its documents are available for public inspection

Pocket all profits

As a single owner, the proprietor need not share its profits with any other individual or entity.

Full managerial control

The proprietor single-handedly controls the entire management of the Sole Proprietorship.

Sole Proprietorship vs OPC

Both Sole Proprietorships and One Person Companies are single-owner corporate structures. However, there are numerous factors which make Sole Proprietorship firm registration stand out against OPC registration. In the table below, we have compared proprietorship firm registration with one person company registration quite comprehensively. This will help you make an informed decision while choosing between the two single owner business entities.

Sole Proprietorship

  • Merits (Pros)
  • Easy to Step Up
  • Low Cost of Operations
  • Lesser Compliances
  • Quick & Easy to Dissolve
  • Full Control over Management
  • Effective Privacy
  • Quick Decisions-Making Process
  • No Profit Sharing
  • Extremely Suitable for Small Businesses
  • Demerits (Cons)
  • Unrestricted Liability
  • Limited Investment Potential
  • Limited Period of Existence
  • No scope of Ownership Transfer

One Person Company

  • Merits (Pros)
  • Limited Liability
  • Separate Management Structure
  • No Profit Sharing
  • Perpetual Succession
  • Ownership Easily Transferred to Nominee
  • Demerits (Cons)
  • Limited Investment Potential
  • High Number of Compliances
  • FDI Not Permitted
  • Restricted Business Operations
  • High Cost of Operations
  • Complex Decision-Making Process
  • Lack of Privacy
  • Long and Costly Incorporation Process

FAQs on Sole Proprietorship Registration

Since there is no requirement for a formal Sole Proprietorship registration, the fee depends on the other tax and regulatory registrations. These include the MSME registration fee, the GST registration fee, and the Shops Act registration fee.
The partnership business is regulated under the Indian Partnership Act of 1932, which prescribes the possibility of two types of Partnership firms – an unregistered firm, and a registered firm. An unregistered firm is formed on the basis of partnership deed registration. On the other hand, registered firms are those additionally registered by the ROF of the state.
Any person who is over 18 years, capable of entering into a lawful contract is eligible to start a proprietorship. The option to create a proprietorship is available to Indian Citizens only. However, NRIs and OCIs are permitted to establish proprietorship firms and invest only on a non-repatriation basis. For repatriation of profits outside India, the NRI must seek a prior approval of the Central Government.
A proprietorship business can be started with any amount of capital as there is no prescribed limit for it. The proprietor must infuse the capital into the proprietorship based on the nature and scale of its business activities. He can introduce or withdraw capital at any time from the accounts of the proprietorship business as drawings.
The opening of bank accounts of proprietorship businesses is regulated by the Reserve Bank of India. It has prescribed the submission of at least two identity proofs of the proprietorship in order to open its bank account. To open a bank account for the business, you can approach any bank near you. Submit the prescribed application form along with the necessary supporting documents. Please click here to read our article on the List of required documents for the proprietorship firms’ opening bank account.
Yes, the proprietorship businesses can be converted to LLPs or Private Limited Companies. However, the conversion process is complicated, and unless it is not necessary, we do not recommend you go for it.
Proprietorships do not have a separate legal identity and hence, are not treated separately for income tax purposes. This means that any profit derived from a sole proprietorship is treated as the income of the proprietor. It is accounted for on the tax returns filed by the proprietor. The business income shall be shown as separate income in the income tax return of the proprietor.
Yes. Unlike other incorporated business forms, the liability of the proprietor towards his sole proprietorship is unlimited. This means that debts and losses accumulated by the business shall be paid off using the personal assets of the proprietor
Since there is no requirement for a formal Sole Proprietorship registration, the fee depends on the other tax and regulatory registrations. These include the MSME registration fee, the GST registration fee, and the Shops Act registration fee.