Registration of Sole Proprietorship

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Company PAN & TAN
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Company PAN - TAN
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Bookkeeping (upto 150 Transactions)
Balance Sheet & P&L accounts
Annual ROC Compliances (up to 25 Lacks)
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Sole Proprietorship Registration

A sole proprietorship, also known as a sole trader, an independent businessman, or a business owner, is a type of business that is owned and controlled by a single person and in which there is no legal distinction between the owner and the business entity.

The sole trader shall receive all revenues (subject to company-specific taxation) and shall have unlimited liability for all losses and debts. Each asset of the business is the owner’s asset, and all the debts of the business also belong to the owners.

Advantages of a Sole Proprietorship

Easy to set up

An Indian citizen may start a proprietorship in India. Since no legal entity exists, the Proprietor’s PAN is used as the criterion for all registrations and enforcement. Udyog Aadhaar registration, GST registration, and Trademark Registration can be done using the promoter's PAN and Aadhaar to establish and secure the firm's identity.

Sole Beneficiary

No business other than that of a sole proprietorship and a company of one person shall be entitled to the owner as the sole beneficiary of the profits. A minimum of at least two persons shall be involved in any other type of entity, such as a partnership, LLP, or company.

Compliance and Taxation

If a company isn't registered with the Ministry of Corporate Affairs, compliance requirements are minimal. The owner must file tax returns only if taxable income exceeds: INR 2.5 lakhs annually (for those under 60) INR 3 lakhs (for owners aged 60 or more) INR 5 lakhs (for owners aged 80 or more)

Why is a sole proprietorship better than a partnership

It's easier to operate: As a single person is at the head of the table of affairs, it is easier to act as the individual will be the sole decision-maker, and there is no need to consider a myriad of opinions. There is no concept of a council meeting or approval by other individuals in a business firm.

Disadvantages of a Sole Proprietorship

Limited scope of expansion of business

As the Proprietorship business is run by a single person, the scope of expansion is limited. Expansion of business requires more capital and more skills. As one can not involve any other person as a partner in a proprietorship firm, the Scope of capital infusion into the business after a certain point of time becomes very difficult.

Higher Financial Risk

As the proprietor enjoys all rewards from the business, similarly, he also bears all the risk. In case a proprietorship business goes into loss and no money to pays its debts, in that case, a proprietor is liable to pay those debts from his/her own savings

Limited access to Bank finances

Unlike Pvt. Ltd. Companies or LLPs, Proprietorship firms are not required to upload financial statements on any website like on the MCA portal, so proprietorship businesses lack financial transparency and scrutiny. So, in many cases, proprietorship firms face challenges to get loans from financial institutions.

Lack of perpetual succession

As the Owner of a proprietorship firm is the whole and sole of the business, most of the proprietorship businesses collapse after the demise of its proprietor or when its owner finds it difficult to run the business due to old age. There is no legal provision of perpetual succession in Proprietorship firms

Proprietorship Firm to Private Limited Company

Conversion of Proprietorship to Private Limited Company –

Advantages of a Private Limited company over proprietorship

The sole owner would have incurred limitless liabilities for any losses suffered, which means that he/she will be obligated to pay personally for any losses incurred by the firm. The regulation of a private limited company makes a clear distinction between the owner and the organization, thereby limiting its liabilities.

Documents required

All documents are listed below.

Identity and Address proof of the directors.
Letter of Authority/POA.
Proof of registered office address.

Proprietorship Firm To OPC

One-person companies are a perfect model for medium-sized business organizations. A one-person company is an enhanced and better type of sole proprietorship company and is, therefore, a smart business decision to transform sole proprietorship into a One-Person Company. This business structure gives full control of the business to the sole owner while at the same time restricts its responsibility to protect its assets since the owner of this company is a shareholder.

Documents required

Identity Proof

Aadhar card, PAN Card, voter ID card. Ration card. Passport, Driving license.

Address Proof.

Bank statement
Electricity bill.
Telephone/Mobile bill

Proposed Directors.

Passport-size photos
Email IDs & Mobile numbers

Registered office

Electricity bill
Rent agreement

Consent of the nominee

Passport-sized
photographs

Proprietorship Firm To LLP

The conversion of a sole proprietorship into a limited liability partnership (LLP) is a good alternative for anyone looking to grow their small and medium-sized business. As it has only one man, it is not possible to convert a sole proprietorship directly into an LLP. It can be achieved either by closing the ownership and registering an LLP or by involving someone else in the business and making him a partner and then converting him to an LLP.

Procedure Conversion of Proprietorship Firm To LLP

The two proposed partners must apply for a DPIN (Designated Partner Identification Number).

Documents required for DPIN:

Passport-sized photograph
A soft copy of the PAN card
Identity and Address Proof

2. Acquire/register DSC: With the DPIN, you can register for DSC (Same documents required).

3. LLP Incorporation: A Form is to be filled for name confirmation, and another Form, FiLLip, should be filled for incorporating an LLP after the name is confirmed.

4. File LLP Agreement: After the incorporation of the LLP, an initial LLP agreement is to be filed within 30 days of incorporation of the LLP.

LLP Registration

Partnership Registration

Digital Signature (DSC)

OPC Registration

Company Registration

Your questions answered

Common questions

What is the Income Tax rate for a proprietorship firm?

Ans: A proprietorship firm is taxed according to its proprietor’s total income, and the normal Individual slab rate is applicable for taxation purposes.

Can a proprietorship firm register under the MSME Act?

Ans: Yes. A proprietorship firm can take UDYAM registration and take the benefits of all MSME schemes.

Is it possible for a proprietorship firm to raise funds through Bank Finances?

Ans: Yes, it is possible to take a Bank loan by a proprietorship firm if it fulfills all the criteria laid by a bank for Bank Finances.

Do we need to register our proprietorship business under any Law/Act?

In a proprietor firm, the whole and sole owner of the business is its proprietor. It is not governed by any specific law. But to protect your Business in the long run, one needs to register under the Shop & Establishment Act. You can also take GST registration for more authenticity and also for opening a current account in a bank. If your business is established and has earned a Brand Value, you must register your Brand name or take a trademark so that you can save the Brand value of your business from unauthorized use.

Is it safe or wise to run a proprietorship business in the long run?

Ans: As we know, a proprietorship firm is run by a single owner. There will be limitations in terms of capital investment or business expansion if it requires special skills. You can not raise money from an investor because you cannot give an investor any stake in your business. So, in the long run, if you feel that your business has the potential to grow, you must convert your proprietorship firm into an LLP or Pvt. Ltd. Company.

Is it compulsory to take GST registration for a proprietorship firm?

Ans: No. It is not mandatory to take GST registration as long as your business turnover does not exceed the threshold turnover limit provided in GST. But practically, what happens if a proprietor approaches a bank to open a current account and the bank demands some legal government registration proof? In that case, Proprietors are compelled to take GST registration.