Proprietorship Registration
Start Your Business Easily
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.
You may also start a One Person Company >> Start OPC
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Start Proprietorship Firm
As two registrations in the name of the proprietorship firm are required as proof of entity and the address, we have made a combo package to start the proprietorship firm.
Important Points:
- Free Consultation
- 100% Online Process
- Easy to Start Business
- MSME Udyam Registration
- GST Registration
- Free Invoicing Software
Overview of Starting a Sole Proprietorship Firm in India
- Timeline
Starts Instantly
- Cost
It varies from state to state, as well as the nature of the business.
- For Indians
Natural persons who are Indian Citizens can start a Proprietorship.
- For NRI/OCI
NRI & OCI can establish a proprietorship on a non-repatriation basis.
- For Foreigner
Foreigners need help to start a proprietorship in India.
- 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 required.
- Obtain the MSME registration for the firm.
- Protect the brand or trademark.
- If planning for export and import, apply for IEC.
Establish a Proprietorship Firm in India.
A sole proprietorship is a single-owner business and is the simplest in which the sole owner infuses all its capital and, therefore, is entitled to all of its profits and losses. The proprietorship firm and the proprietor are one and the same thing. There is no distinction between ownership and management. There is a requirement for incorporation or registration of the sole proprietorship as such. However, certain common registrations such as GST, MSME, etc, are generally obtained for the firm.
Key Features of Sole Proprietorship
Single Owner
Full Control Over Management
Entitlement to 100% Profits
Unrestricted Liability
Limited Existence
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Eligibility to Start Sole Proprietorship
While sole proprietorship is the simplest form of business and is less regulated, it is only available for Indian Citizens and Natural Persons of eighteen years of age. Foreigners can not establish sole proprietorships. However, there is an exception in the case of NRI and OCI, they are allowed to establish proprietorship.
- 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.
Documents Required to Start Sole Proprietorship
As mentioned earlier, there is no need for registration or incorporation for a proprietorship firm. However, to conduct the proprietorship business, certain basic registrations, such as GST, MSME, or IEC, may be obtained. The following list of required documents is crucial for these registrations.
Directors/Shareholder Documents
PAN Card
The PAN Number of the proprietor shall be used for all purposes in case of sole proprietorship. As the proprietor and the sole proprietorship are the same for income tax, no separate PAN card is allotted to the sole proprietorship.
Aadhar Card
Aadhar card of the proprietor is a mandatory document for seeking registration under the GST and Udyam Aadhar (MSME Registration). The applications are authenticated with aadthar-linked mobile OTP validation.
Colour Photo
Submit a photo of each proposed director and shareholder with a full-face frontal view and a plain white or light-coloured background.
Address Proof
The proprietor must submit any one document which is not older than two months as Residential Address proof
- Bank Statement
- Electricity Bill
- GAS Bill
- Telephone Bill
- Mobile Bill
Office Address
Proof of the address proof of the proprietorship should not be older than two months. The utility bill must have the full name and full address. Any one document from below is acceptable.
- Electricity Bill
- Telephone Bill
- GAS Bill
- Mobile Bill
NOC from the Owner of the Office Space
The owner of the premises where the office of proprietorship shall be situated must issue a No Objection Certificate (NOC) for the use of the office of the proprietorship firm.
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.
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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.
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Select a Unique Name for the BusinessThe 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.
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Take MSME / Udyam RegistrationSole 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.
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Proprietorship GST RegistrationEligible 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.
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Get Shops & Establishment Act RegistrationExcept 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.
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Industry-specific RegistrationsCertain 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
To open a bank account for the sole proprietorship firm, you must contact any national bank. They would insist on two documents with the name of the sole proprietorship firm and address. Where one document is taken as proof of entity, the other is the address proof. These requirements are part of the KYC requirements prescribed by the RBI.
The government fees include the registration fee charged by the Registrar of Companies for Pvt Limited company registration, stamp duty levied by the concerned state government (which may differ from state to state), and the cost of making the DSC. By partnering with Setindiabiz, you can ensure a smooth process and minimise associated costs.
The RBI regulations regulate the banks and must adhere to the KYC-related requirements as prescribed from time to time. We can help you arrange the necessary registration, as discussed above.
Sole Proprietorship vs OPC
Both Sole Proprietorships and One-Person Companies are single-owner business structures. In the table below, we have comprehensively compared proprietorship firm registration with one-person company registration. 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 Profit Sharing
- 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.