Proprietorship Registration
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Starting a Proprietorship Firm is easy, simple, and cost-effective. Our packages offer free consultation, GST Registration, and Udyam Enrolment (MSME) to set up a proprietorship firm. The proprietorship is the simplest form of business. Talk to our start-up advisors to get started.
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IMPORTANT DISCLAIMER
We are a professional consulting firm specialising in company registration, taxation, accounting, payroll, compliance, and intellectual property rights (IPR) services to assist new and existing businesses in India. We provide our professional services at a reasonable fee, explaining the eligibility, process, and documents required for setting up and maintaining a business. We also prepare and file necessary applications with relevant government agencies such as the Registrar of Companies (ROC) and the Income Tax Department. We do not directly provide government documents or represent ourselves as a government agency.
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Overview of Starting a Sole Proprietorship Firm in India
- Timeline
Starts Instantly
- Eligibility
- Single Person Ownership
- Only a natural person can be a proprietor
- Only Indian citizens are eligible to start a sole proprietorship.
- NRI/PIO can start a proprietorship on a Non-Repatriation basis.
- Must have a Registered Address
- Unique Name
- Adequate Capital (No Min or Max Limit)
- Stepwise Process
Here are the steps to start a Sole Proprietorship:
- No registration is required.
- You can start at your discretion.
- The proprietor (owner) must be 18 or older.
- Apply for GST registration if needed.
- Obtain the MSME registration for the firm.
- Protect the brand or trademark.
- If planning for export and import, apply for IEC.
- Documents Required
Documents Required to Setup Partnership
- Passport size colour photo
- PAN Card (Mandatory)
- Identity Proof of Proprietor
- Proof of Residence of Proprietor
- Proof of Registered Office Address
- NOC from the owner of registered office premises
Get started to establish a Proprietorship Firm in India
A Sole Proprietorship is a single-owner business in which the sole owner infuses all its capital and is entitled to its profits and liabilities. The sole owner’s responsibilities extend to controlling the firm’s management. There is no formal requirement for incorporating a Sole Proprietorship, as it is not regulated under any statute. So, it is apparent that it does not have a legal identity of its own. A sole proprietorship operates under the identity of its owner or Proprietor. This implies that in a Sole Proprietorship, the identity of the business and its owner are one and the same. For this reason, it cannot exist or be continued beyond the life of the Proprietor.
Key Features of Sole Proprietorship
Single Owner
Full Control Over Management
Entitlement to 100% Profits
Unrestricted Liability
Limited Existence
Operates on the Owner’s Identity
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Eligibility and List of Documents to Start Proprietorship
List of Documents
Sole Proprietorships are unregistered entities, so there is no requirement to incorporate them formally. However, their legal existence can be established by other tax and regulatory registrations that 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 provides information about the minimum requirements for setting 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
- Single Person Ownership
- Only a natural person can be a proprietor
- Only Indian citizens are eligible
- Must have a Registered Address
- Unique Name
- Adequate Capital (No Min or Max Limit)
- NRI/PIO can start a proprietorship on a Non-Repatriation basis.
List of Documents
- Documents of the Proprietor
- PAN Card
- Aadhar Card
- Two Coloured Photograph
- Address Proof
- Cancelled Cheque for Bank Details
- Documents of Registered Office
- Proof of Address of Registered Office
- NOC from the Owner of the Office Space
- Rent Agreement, if applicable
Note:
- Address Proof of the Proprietor must not be older than two months.
- The Rent Agreement must be stamped by a Public Notary. Stamp Duty and Notary Charges applicable in the respective state must be paid accordingly.
Stepwise Process for Starting a Sole Proprietorship
The Proprietorship Registration process in India is the easiest and simplest among all business structures. There is no requirement for a formal incorporation. You can start your business immediately after you have fulfilled all the minimum requirements mentioned above. However, you must take specific mandatory registrations to establish your firm’s legal existence after beginning business operations. Navigate the steps below to complete the Sole Proprietorship Registration process in India.
STEP
01
Documentation for starting proprietorship.
To start a proprietorship business, you should arrange the primary KYC documents for the proprietor, the business’s sole owner. Proof of the proprietor’s Aadhar, Pan, and residential address would be needed in the process. Every business in India must declare one address as its Principal Place of Business, for which proof of the premises, such as a utility bill and NOC from the owner of such premises, must be obtained.
STEP
02
Select a Unique Name for the 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. Also, the chosen name must not infringe the trademark of some other business. As a best practice, you should register the business name as your adopted trademark. We can help you register the business name, domain name, brands, and logo as a Trademark.
STEP
03
Take 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 buyer payments, and 50% rebates on IPR registration. Moreover, an MSME registration certificate is crucial for opening a business bank account. We provide MSME Registration to Proprietorship Firms throughout India.
STEP
04
Proprietorship GST Registration
Eligible Sole Proprietorship Firms must register for GST to fulfil all GST-related compliances. The applicant firm can submit the application and all GST registration documents required for a sole Proprietorship firm on the GST portal. When the GST department approves the application, a GSTIN is allotted to the firm. This GSTIN can be used for all future GST-related activities.
STEP
05
Get Shops & Establishment Act Registration
Except for 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
06
Industry-specific Registrations
Certain licenses must be obtained mandatorily based on the nature of the business activity and the registered office location of the Proprietorship. For instance, an IEC Code is required if the Proprietorship business conducts import/export activities. An FSSAI Registration or License is also required if the business deals in food-related activities.
How to open a Bank Account for the Sole Proprietorship firm
Banking is a regulated activity in India, and as a result, all commercial banks, whether they are public sector or privately owned, need to follow the guidelines set by the Reserve Bank of India (RBI), the regulator for banks in India. Opening a bank account is also regulated, and to prevent fraudulent activities and ensure the legitimacy of the business, the RBI has issued guidelines regarding the KYC documents that must be obtained before a bank can open an account for sole proprietorship concerns.
Opening a bank account for a sole proprietorship is straightforward. As a proprietorship is not an incorporated entity, it does not possess a certificate of incorporation or registration. However, two documents in the proprietorship’s name are required. You can choose from the following most common documents, making the process simple and hassle-free.
While the above are general guidelines, it’s important to note that individual banks may have additional requirements or specific procedures. To ensure a smooth account opening process, it’s advisable to check with your chosen bank for their exact documentation and process.
Benefits of Proprietorship Firm Registration Online
Starting a sole proprietorship is much more straightforward than registration for other business structures in India. Above the simplicity of formation, there are several key benefits that a Proprietorship Firm offers. The table below details all these benefits for your clear and comprehensive understanding.
Easy to Establish
Establishing a sole proprietorship is the easiest way to start a business in India. Any Indian citizen can start a proprietary concern, so no specific incorporation or prior registration is needed.
Easy to operate
As the proprietorship is owned and controlled by only one person and, as such, does not have a separate legal existence, therefore it is easy to operate and maintain the business.
Lesser compliances
The profits of the proprietorship firm are included as the proprietor's (owner) business income, and as such, no separate income tax return is required to be filed.
Privacy Intact
Since sole proprietorships are unregistered, none of their documents are available for public inspection; therefore, from the privacy point of view, the sole proprietor is the best.
Pocket all profits
As a single owner, the proprietor does not need to share his profits with any other individual or entity and reap the benefits of his investment alone.
Full managerial control
There is no difference between the management and ownership, and the proprietor who invests the capital also makes all the decisions and controls the firm single-handedly.
Sole Proprietorship vs OPC
Both Sole Proprietorships and One-Person Companies are single-owner business structures. 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
Pros
- Easy to Set 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
Cons
- Unrestricted Liability
- Limited Investment Potential
- Limited Period of Existence
- No scope of Ownership Transfer
One Person Company
Pros
- Limited Liability
- Separate Management Structure
- No Sharing of Profits
- Perpetual Succession
- Ownership Easily Transferred to Nominee
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
1. What is a sole proprietorship Firm?
A sole proprietorship firm is the simplest form of business owned and controlled by a single individual. The owner of the proprietorship firm is known as the proprietor. The proprietor alone invests the entire capital and is thus entitled to all the sole proprietorship’s income. The liability of a sole proprietor is personal and unlimited. This indicates that the proprietor is liable to pay off all liabilities from his pocket if such a need arises.
2. Who can be a Sole Proprietor?
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.
3. What is the minimum capital required to start a Proprietorship Firm?
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.
4. How to open a bank account for a Proprietorship Firm?
The Reserve Bank of India regulates the opening of bank accounts of proprietorship businesses. It has prescribed the submission of at least two proofs of identity 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 accounts.
5. Can I later convert my Proprietorship into a Company or LLP?
Yes, proprietorship businesses can be converted to LLPs or Private Limited Companies. However, the conversion process is complicated, and we do not recommend it unless it is necessary.
6. How are sole proprietorships treated for tax purposes?
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 proprietor’s income tax return.
7. Is the proprietor personally liable towards his sole proprietorship?
Yes. Unlike other incorporated business forms, the proprietor’s liability towards his sole proprietorship is unlimited. This means that debts and losses accumulated by the business shall be paid off using the proprietor’s personal assets.
8. What is the applicable Sole Proprietorship Registration Fee?
Since a formal Sole Proprietorship registration is not required, 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.