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Registration of Sole Proprietorship Firm
- Sole proprietorship registration made simple with expert support
- Complete documentation and filing support done in one go
- End-to-end support for proprietorship registration and compliance
Advantages of Sole Proprietorship
Below are the main advantages of sole proprietorship registration in India:
Very Simple to Start and Compliance
When compared to other business entities, establishing a sole proprietorship is much easier. It requires very little paperwork from the government end and can be set up easily. Post-registration compliance is also much simpler when compared to other business entities.
Better Tax
Benefits
The income generated by the firm directly passes through a single layer of income tax. In some cases, it is also eligible for up to a 20% tax deduction. These deductions can help the owners save a lot of money.
Complete Control Over the Business
Since all business handling is conducted by a sole owner, there will be no delays in taking quick Business decisions. The sole proprietor has 100% ownership of the business and will be responsible for the day's activities.
Have a Direct Relationship With Customers and Clients
In a sole proprietorship, the individual has better opportunities to directly interact with their clients. In case of any dissatisfaction, the clients can directly communicate with the proprietor, which improves personal relationships between the owners and the customers.
Can Easily Hire Employees
Sole proprietorships can easily hire individuals and employees to work as independent consultants,the contribution to the project or decision of a consultant is considered a recommendation as per the law.
Checklist for Sole Proprietorship Registration
The checklist for registering a sole proprietorship in India are:
- Choose a perfect company name for your sole proprietorship business.
- Open a Business Bank account in the company name
- Get Registered as an MSME
- Procure required license including FSSAI license or shop and establishment Act license
- Based on the business requirement you can register for ESIC or EPFO
- Obtain all the required certification under Shop and Establishment Act of 1947 ( if applicable).
Eligibility Criteria for Sole Proprietorship Registration
The eligibility criteria for sole proprietorship registration are :
- The applicant should be above 18 years
- The applicant should be an Indian Citizen
- They should have the legal capacity to enter into a contract
- The proprietor should not have any legal disabilities
- Applicant should not be declared bankrupt or convicted for felony previously
- The purpose of the business should be clearly outlined while starting a sole proprietorship
- The business should be a lawful activity and should prevent selling illegal goods and services
- The business should have a unique name that was not registered previously.
Required Documents for Sole Proprietorship Registration
The following documents required for Sole Proprietorship Registration:
- Aadhaar card of the sole proprietor
- Permanent Account Number (PAN) card or any other identity proof of the sole proprietor
- Bank account details in the name of the proprietorship
- Address proof of the business
- Rental agreement of the registered office address
- NOC from the landlord
- Electricity bill, Utility bill or sale deed in case it is a self owned property
- Trade license (if applicable)
- GST number or GST certificate
Post-Registration Compliances Sole Proprietorship
After the registration of a sole proprietorship, the proprietor should make sure to follow the compliance requirements from time-to-time.
Here is a set of post-registration compliances for sole proprietorships in India:
Filing GST Returns
As per the GST Act the proprietor has to file GST returns if the aggregate business turnover is more than ₹20 lakhs.
Bookkeeping and Accounting
As per the GST Act the proprietor has to file GST returns if the aggregate business turnover is more than ₹20 lakhs.
File TDS Returns
The TDS returns have to be filed on time by the proprietor to avoid fines. Based on the purpose of deduction the following TDS return forms should be filed:Form 24Q for TDS on salaries
Form 27Q for TDS deducted for a non resident or foreign company
Form 26QB for TDS on payment for transfer of immovable properties
Form 26Q for TDS in any other case
Tax Audit
If the sole proprietor has a turnover or conducts business exceeding ₹1 crore in a financial year it is mandatory to have a tax audit before tax filing. Vakilsearch has a team of experienced chartered accountants who can guide you when it comes to regulatory compliances , tax advantages, and return filing. Book a slot to consult today.
Comply with Labour Laws
If the proprietor decides to hire employees, then they will have to follow the other labour laws of India. The proprietor should agree to the minimum wage requirements, working regulations, and other employee benefits.Professional Tax Registration
Owners of sole proprietorships, corporations, and partnership firms must pay tax on their trade and profession if their income exceeds the threshold. Employers are required to register for professional tax and obtain the professional tax registration certificate.Sole Proprietorship Tax Implications
The tax rate for sole proprietorships is the same as that of the owner prior to the establishment of the business. Instead of filing a separate business tax return, as a corporation would, they disclose their income and costs on their personal income tax taxes. Here is a complete outline:
Filing Income Tax Returns
A sole proprietorship is often taxed on its net income. This is the total revenue earned after deducting all the allowable deductions. This income is directly reported by the owner on their personal income tax return. If the owner is a single person working, then self-employment tax should be filed.
The Self Employment Tax
It is the equivalent of social security and Medicare taxes for self-employed people.Goods and Service Tax
If the business is involved in selling goods and services, then it is subject to filing GST returns or sales tax.Employment tax or TDS returns
If the proprietor has multiple employees, then it is crucial to find TDS returns from time to time.FAQs on Sole Proprietorship Firm Registration
Find answers to common questions about sole proprietorship registration in India, including costs, legal requirements, and benefits to help you make informed decisions.What is the cost of registering a sole proprietorship firm?
The cost of registering a sole proprietorship starts from ₹699, covering the basic registration process. Additional fees may apply based on location, legal requirements, and any extra services selected. For a detailed cost estimate tailored to your needs, please consult with our registration experts.
What are some real-life examples of sole proprietorships?
Examples include Kumar Book Store, Anita’s Bakery, Vijay Photography, Rao’s Tailoring Services, and Suman Consultancy—small businesses personally owned and operated, offering services like books, baked goods, photography, tailoring, and consulting.
Is GST registration required for a sole proprietorship firm?
GST registration is mandatory for sole proprietorships if annual turnover exceeds ₹20 lakh (₹10 lakh for certain states) or if the business engages in interstate transactions.
Can a sole proprietorship obtain a PAN card?
Yes, a sole proprietorship requires a PAN card in the owner’s name for tax filings and financial transactions.
Should I use a personal bank account or a business account for my sole proprietorship?
While a personal bank account may be used, opening a separate business account is recommended to maintain financial clarity and simplify accounting.
Do I need a business license to operate a sole proprietorship firm in India?
Depending on the business activity and location, certain licenses may be required (e.g., trade license, shop and establishment license). Check with local authorities to ensure compliance.
How long does it take to register a sole proprietorship?
Typically, registration can take 5-7 business days. At Vakilsearch, we aim to complete the process within 7 days.