Proprietorship Registration Process
Start your business as proprietorship quickly within one day. There is no specific registration requirement for a proprietorship business. However, to start the same, some other registrations are required as it is included in our basic package. The Sole Proprietorship is the simplest form of business in which enterprises can start. Only one person invests the entire capital in the firm, and he alone is entitled to the business's profits. The PAN Card of the proprietor is used as PAN of the firm. Hence you do not have to apply for a new PAN, However TDS Number, GST Registration and Udyam is advisable.
Easiest Process to Start Sole Proprietorship
GST Registration Certificate
The Registration under GST is a must for doing business if turnover exceeds 20 Lakh or you do Inter-State. Business
MSME (Udyam) Registration
To avail several benefits of the MSME Act, you should register as UDYAM. This is a vital registration for small business
Shop & Establishment Registration
Every shop or commercial unit requires registration with the labour department. It is mandatory
Bank Account of Proprietorship
This is necessary to carry on the business. You can open a current bank account with any scheduled Bank
Document & Pricing
Documents Required to Start a Proprietorship Firm
Office Address Related
- Proof of Office Address
- It should not be older than 2 months
- NOC from the Owner of Premises List of Document for Office Address
- Electricity Bill
- Property tax receipt
- Sale Deed
- Rent Agreement(if rented)/
- NOC From Owner
Documents of the Sole Proprietor
- Colour Photo - Two
- Aadhar Card
- Pan card and Cancelled Cheque Residential Address Proof (See List)
- Voter ID card
- Driving License
- Bank Statement
- Electricity Bill
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Comparison among Sole Proprietorship Firm /OPC / Partnership
There is no specific law of parliament or state that regulates the proprietorship business that is why it is so simple to start and operate. It also means that there is no way the details of the composition of the proprietorship business can be known.
One Person Company is owned by a single owner, akin to proprietorship. However, the OPC is registered in and regulated by the Companies Act, 2013. The details of the companies are verifiable at the MCA Portal. | Learn more on OPC
The partnership firms are a traditional form of business and can start by way of an agreement between the parties. The Partnership Act of 1932 regulates the affairs if a partnership firm. The details of the partnership firm are not verifiable easily. | Learn more on Partnership Firm
You can start the proprietorship firm with any amount of capital. It means there is no minimum or maximum capital prescribed as such for a proprietorship firm.
For a company including the OPC, before 2015 amendment of the companies act, there was a requirement of minimum paid-up capital of Rs 1 Lakh. However, post amendment of the law there is no prescribed minimum capital as such. It means you may incorporate an OPC with any capital as you desire. Learn more on OPC
Just like the proprietorship or partnership, there is no minimum paid-up capital that has been prescribed in the partnership act
A single Individual can start a Sole Proprietorship Firm, where he alone will invest all the capital and shall be entitled to all the profits of the firm.
The OPC can be owned by only one Individual, also known as the sole shareholder. However, the sole owner of the OPC has to nominate another person to become his or her nominee. The OPC can have up to 15 directors. Click here to understand the difference between a shareholder and a director . To learn more about OPC Registration
In a partnership firm, a minimum of two partners is prescribed with a cap of a maximum of 20 partners.
The proprietorship business lacks the benefit of perpetual succession. With the demise of the proprietor, the firm also ends its life. The proprietor and the proprietorship are the one and same.
The OPC is recognised as a separate legal entity in the eyes of the law, and the business is transferred to the nominee after the demise of the proprietor.
Just like proprietorship, the partnership business is not regarded as a separate business. In fact, with the death or removal of a partner, a new firm comes in existence in place of the old one.
The proprietor is personally liable for all the liabilities and debts of the business. To pay off these liabilities, the personal properties of the proprietor can also be attached.
In an OPC the single shareholder is not liable for all the liabilities or debts of the company, and instead, he/she is responsible for paying only the sum which may be outstanding from her subscribed share capital.
The liabilities of the partnership firm is the joint or severe liability of each and every partner of the firm. Akin to the proprietorship, the personal assets of the partners can be sold off to pay the debts of the firm.
Advantages and Disadvantages of Sole Proprietorship Business Type
Easy to Start
You can start the proprietorship immediately at your will, take care that the business name does not infringes someone else's trademark. You may request a free trademark search from us. We strongly advise you to protect your business name, logo and domain name under Trademark Law. Click here to order for Trademark Filing . As per your business needs, you can go for MSME, GST or IEC Registration.
Ease of compliance
The most significant advantage of a proprietorship business is that you don't have to file any additional annual return like a company. However, please note that the taxes are applicable in the same manner as it applies to any other business format; hence you will have to pay Income Tax and GST and file required returns.
Easy to Close the Proprietorship Business
To close the proprietorship, there is nothing which you have to do specifically. Pay all statutory dues like Income tax, GST etc. and surrender all the registrations taken in the name of the firm. The closing proprietorship is easier in comparison to other forms of business.
Unlimited Liability of Business
A proprietor is personally liable for all the future liabilities of the proprietorship firm, which can occur due to constant losses in the business. To pay off debt or obligation of the business, the proprietor has to sell his personal assets, like the house, jewellery etc. or face insolvency proceedings in his name. Frankly, this is a very serious demerit, and to overcome this, you may incorporate a One Person Company.
Because all the tax registrations like GST, Income Tax and Import Export Code are linked with the PAN Number of the proprietor, hence in case you wish to transfer the business to someone else then it cant be transferred as a going concern. In other words, the business as such is not transferable.
Lifespan of Proprietorship
The existence of a proprietorship firm is tied with the life of the proprietor. On the demise of the proprietor, the firm also comes to an end. The remaining assets or liabilities are then transferred to the legal heirs as per law by the court of law.
Fundraising or Angel Investment
The proprietorship firm does not have the ability to raise equity fund from angel investors or the venture capital firms. The banks, NBFC and other financial institutions also do not favour financing of a proprietorship firm.
Video On Proprietorship Registration
Documentation - Day - 1
The process starts with documentation of the proprietor and the place of business where the business of the firm shall be carried on, ensure that the documents are updated and correct. The list of documents required is provided above for your reference. We shall also require information in the Questionnaire For Proprietorship Registration.
Selection of Name - Day - 1
First thing is to select a unique name of your proprietorship business and the starting point should be to search the proposed name of the business in trademark register to avoid any infringement on someone else's trademark. To learn more on trademark click here
MSME - UDYOG Aadhar - Day - 1
To open a bank account there is need of two documents in the name of the proprietorship, one of the registrations could be Udyog Aadhar which enables an entrepreneur to seek online services offered by Government Departments apart from various other benefits under MSME Act. To learn more on MSME Registration, click here
GST Registration - Day - 1-7
You may not be able to supply goods or services all over India unless GST Registration is obtained, However for same state supply the limit is 20 Lac. This also serves as a second document document issued for the proprietorship, which shall be required by banks while opening a bank account in the name of the firm.To learn more on GST Registration, click here
TAN Number Allotment - Day - 1-7
TAN number is a permanent number allotted to business for complying with the provisions of withholding tax. You are required to deduct TDS while making payments, hence the next step is to obtain TAN number, which is mandatory to submit TDS Returns.
1.What is the difference between Proprietorship and Other Forms of Business?
We h ave prepared a detailed and easy to understand comparative table showing availability of features and advantages of one form of business to that of others. The same can be found at the end of this page. Click here to learn more.
2.What is the minimum amount of capital required to start a Proprietorship Firm?
A proprietorship business can be started with any amount of capital and as such, there is no provision in the law which prescribe any minimum capital for the firm. The capital must be infused by the proprietor based on the nature and scale of the proposed business. You shall have the ability to introduce or withdraw capital at any time from the accounts of the proprietorship business as drawings.
3.Do I require another person to register a Sole Proprietorship in India?
No, A proprietorship business is owned and controlled by a sole person. There is no requirement to engage any other person to start a proprietorship business.
4.How to open a bank account for a Proprietorship?
The opening of Bank Account is regulated by the Reserve Bank of India, which have prescribed submission at least two entity proof for the proprietorship. To open a bank account, you may approach any bank nearest to you, and generally, they need following documents.1. List of Entity Proof of Sole Proprietorship: (Any two documents from the below list)
- Certificate of Registration with MSME,
- GST Registration Certificate,
- Registration with Shops & Establishment,
- Registration or License-related to Central-State govt.,
- Certificate related to Municipal authorities,
- Tax returns Showing Name of Proprietorship Firm,
- Import Export Certificate in Firm Name,
- CA certificate for Existence of Entity,
- Registered lease/ license in Proprietorship Name,
- Utility Bills/ TDS certificate in the name of the firm,
- PAN Card,
- Driving Licence,
- ID cards issued central and state govt.,
- Passbook scheduled commercial bank
- Marriage certificate,
- Voters ID card,
- Aadhar Card
- Driving Licence,
- ID cards issued central & state govt.,
- Passbook scheduled commercial bank,
- Utility Bill,
- Marriage certificate,
- Municipal corporation bill,
- Credit Card Bill,
- Registered Leave and Licence Agreement,
- Bank statement
5.Can I later convert my Proprietorship into a Company or LLP?
Yes, the proprietorship can be converted to LLP or Private Limited Company
6Registration of The OPC Company with ROC
- Copy of Aadhar Card
- PAN card of the Sole Proprietor
- Details of Business Place
7.Will my Proprietorship firm have a Certificate of Incorporation or Registration?
There is no certificate of registration or incorporation for proprietorship business as such. The legal identity of proprietorship as an entity is determined through various other registration or licenses obtained in the name of the proprietorship firm on the case to case basis. Similarly, each specific registration shall result in the issuance of a certificate of registration, for example, GST Certificate, MSME Registration Certificate, Tan Allotment Letter, etc.
8.Under which Government Authority, the application of Sole Proprietorship Firm Registration is submitted?
There is no law which enforces registration of a proprietorship firm as such, SETINDIABIZ helps entrepreneurs in securing registration under MSME, GST, Shops & Establishment, etc. the MSME registration is done under The Micro, Small and Medium Enterprises Development Act, 2006 of Central Government.
9.Does the proprietor have to be an Indian to start a Proprietorship firm?
Yes. Only an Indian Citizen can start proprietorship business. Similarly, no foreign funding is allowed in a proprietorship form of business. However, an NRI or a Person of Indian Origin (POI) can invest in proprietorship with prior approval from the central government of India.
10.What is a sole proprietorship?
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.
11.How are sole proprietorship treated for tax purposes?
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.
12.How to Establish a Sole Proprietorship business?
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.
13.Is it difficult to open a Bank Account for proprietorship?
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.
14.Am I personally liable for my business under a sole proprietorship?
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.
15.Do I need an attorney to help me start a sole proprietorship?
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.